Correlation Between Sofina Socit and Onward Medical

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

By analyzing existing cross correlation between Sofina Socit Anonyme and Onward Medical NV, you can compare the effects of market volatilities on Sofina Socit and Onward Medical 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 Sofina Socit with a short position of Onward Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sofina Socit and Onward Medical.

Diversification Opportunities for Sofina Socit and Onward Medical

0.27

Correlation Coefficient

Sofina Socit  Onward Medical

Modest diversification

The 3 months correlation between Sofina and Onward is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Onward Medical NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onward Medical NV and Sofina Socit 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 Sofina Socit Anonyme are associated (or correlated) with Onward Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onward Medical NV has no effect on the direction of Sofina Socit i.e., Sofina Socit and Onward Medical go up and down completely randomly.

Pair Corralation between Sofina Socit and Onward Medical

Assuming the 90 days trading horizon Sofina Socit Anonyme is expected to generate 0.71 times more return on investment than Onward Medical. However, Sofina Socit Anonyme is 1.41 times less risky than Onward Medical. It trades about -0.05 of its potential returns per unit of risk. Onward Medical NV is currently generating about -0.13 per unit of risk. If you would invest  22,240  in Sofina Socit Anonyme on September 4, 2024 and sell it today you would lose (320.00) from holding Sofina Socit Anonyme or give up 1.44% of portfolio value over 90 days.

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

Sofina Socit Anonyme  vs.  Onward Medical NV

Sofina Socit Anonyme

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sofina Socit Anonyme are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Sofina Socit is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Onward Medical NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Onward Medical NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Onward Medical is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sofina Socit and Onward Medical

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

The idea behind Sofina Socit Anonyme and Onward Medical NV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.