Correlation Between Softimat and Melexis NV

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

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

Diversification Opportunities for Softimat and Melexis NV

0.47

Correlation Coefficient

Softimat  Melexis NV

Very weak diversification

The 3 months correlation between Softimat and Melexis is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Softimat SA and Melexis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melexis NV and Softimat 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 Softimat SA are associated (or correlated) with Melexis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melexis NV has no effect on the direction of Softimat i.e., Softimat and Melexis NV go up and down completely randomly.

Pair Corralation between Softimat and Melexis NV

Assuming the 90 days trading horizon Softimat SA is expected to generate 0.65 times more return on investment than Melexis NV. However, Softimat SA is 1.53 times less risky than Melexis NV. It trades about 0.03 of its potential returns per unit of risk. Melexis NV is currently generating about 0.02 per unit of risk. If you would invest  92.00  in Softimat SA on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Softimat SA or generate 2.17% return on investment over 90 days.

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

Softimat SA  vs.  Melexis NV

Softimat SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Softimat SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Softimat is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Melexis NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Melexis NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Melexis NV 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 Softimat and Melexis NV

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

The idea behind Softimat SA and Melexis 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.