Correlation Between Sofwave Medical and Amanet Management

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

By analyzing existing cross correlation between Sofwave Medical and Amanet Management Systems, you can compare the effects of market volatilities on Sofwave Medical and Amanet Management 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 Sofwave Medical with a short position of Amanet Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sofwave Medical and Amanet Management.

Diversification Opportunities for Sofwave Medical and Amanet Management

-0.54

Correlation Coefficient

Sofwave Medical  Amanet Management

Excellent diversification

The 3 months correlation between Sofwave and Amanet is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sofwave Medical and Amanet Management Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amanet Management Systems and Sofwave Medical 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 Sofwave Medical are associated (or correlated) with Amanet Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amanet Management Systems has no effect on the direction of Sofwave Medical i.e., Sofwave Medical and Amanet Management go up and down completely randomly.

Pair Corralation between Sofwave Medical and Amanet Management

Assuming the 90 days trading horizon Sofwave Medical is expected to generate 1.77 times more return on investment than Amanet Management. However, Sofwave Medical is 1.77 times more volatile than Amanet Management Systems. It trades about 0.1 of its potential returns per unit of risk. Amanet Management Systems is currently generating about 0.18 per unit of risk. If you would invest  164,800  in Sofwave Medical on October 23, 2024 and sell it today you would earn a total of  10,400  from holding Sofwave Medical or generate 6.31% return on investment over 90 days.

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

Sofwave Medical  vs.  Amanet Management Systems

Sofwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofwave Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Amanet Management Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amanet Management Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amanet Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sofwave Medical and Amanet Management

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

The idea behind Sofwave Medical and Amanet Management Systems 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.