Correlation Between Softronic and Prevas AB

Can any of the company-specific risk be diversified away by investing in both Softronic and Prevas AB 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 Prevas AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Softronic AB and Prevas AB, you can compare the effects of market volatilities on Softronic and Prevas AB 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 Prevas AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softronic and Prevas AB.

Diversification Opportunities for Softronic and Prevas AB

-0.09

Correlation Coefficient

Softronic  Prevas AB

Good diversification

The 3 months correlation between Softronic and Prevas is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and Prevas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prevas AB 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 Prevas AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prevas AB has no effect on the direction of Softronic i.e., Softronic and Prevas AB go up and down completely randomly.

Pair Corralation between Softronic and Prevas AB

Assuming the 90 days trading horizon Softronic AB is expected to under-perform the Prevas AB. But the stock apears to be less risky and, when comparing its historical volatility, Softronic AB is 1.2 times less risky than Prevas AB. The stock trades about -0.05 of its potential returns per unit of risk. The Prevas AB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  11,040  in Prevas AB on December 1, 2024 and sell it today you would lose (100.00) from holding Prevas AB or give up 0.91% of portfolio value over 90 days.

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

Softronic AB  vs.  Prevas AB

Softronic AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Softronic AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Softronic is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Prevas AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Prevas AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Softronic and Prevas AB

The main advantage of trading using opposite Softronic and Prevas AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Softronic position performs unexpectedly, Prevas AB 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 Prevas AB will offset losses from the drop in Prevas AB's long position.

The idea behind Softronic AB and Prevas 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.