Correlation Between SoftOx Solutions and Napatech

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

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

Diversification Opportunities for SoftOx Solutions and Napatech

0.06

Correlation Coefficient

SoftOx Solutions  Napatech

Significant diversification

The 3 months correlation between SoftOx and Napatech is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SoftOx Solutions AS and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS and SoftOx Solutions 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 SoftOx Solutions AS are associated (or correlated) with Napatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Napatech AS has no effect on the direction of SoftOx Solutions i.e., SoftOx Solutions and Napatech go up and down completely randomly.

Pair Corralation between SoftOx Solutions and Napatech

Assuming the 90 days trading horizon SoftOx Solutions AS is expected to generate 7.3 times more return on investment than Napatech. However, SoftOx Solutions is 7.3 times more volatile than Napatech AS. It trades about 0.13 of its potential returns per unit of risk. Napatech AS is currently generating about -0.02 per unit of risk. If you would invest  1.30  in SoftOx Solutions AS on December 1, 2024 and sell it today you would earn a total of  1.80  from holding SoftOx Solutions AS or generate 138.46% return on investment over 90 days.

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

SoftOx Solutions AS  vs.  Napatech AS

SoftOx Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoftOx Solutions AS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, SoftOx Solutions displayed solid returns over the last few months and may actually be approaching a breakup point.

Napatech AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Napatech is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SoftOx Solutions and Napatech

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

The idea behind SoftOx Solutions AS and Napatech AS 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..