Correlation Between Softronic and Micro Systemation

Can any of the company-specific risk be diversified away by investing in both Softronic and Micro Systemation at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Softronic and Micro Systemation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Softronic AB and Micro Systemation AB, you can compare the effects of market volatilities on Softronic and Micro Systemation and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Softronic with a short position of Micro Systemation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softronic and Micro Systemation.

Diversification Opportunities for Softronic and Micro Systemation

0.79

Correlation Coefficient

Softronic  Micro Systemation

Poor diversification

The 3 months correlation between Softronic and Micro is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation and Softronic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Softronic AB are associated (or correlated) with Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of Softronic i.e., Softronic and Micro Systemation go up and down completely randomly.

Pair Corralation between Softronic and Micro Systemation

Assuming the 90 days trading horizon Softronic AB is expected to generate 0.79 times more return on investment than Micro Systemation. However, Softronic AB is 1.27 times less risky than Micro Systemation. It trades about 0.06 of its potential returns per unit of risk. Micro Systemation AB is currently generating about -0.02 per unit of risk. If you would invest  1,860  in Softronic AB on October 9, 2024 and sell it today you would earn a total of  475.00  from holding Softronic AB or generate 25.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Softronic AB  vs.  Micro Systemation AB

Softronic AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Softronic AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Softronic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Micro Systemation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Micro Systemation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Softronic and Micro Systemation

The main advantage of trading using opposite Softronic and Micro Systemation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Softronic position performs unexpectedly, Micro Systemation can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Micro Systemation will offset losses from the drop in Micro Systemation's long position.

The idea behind Softronic AB and Micro Systemation AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.