Correlation Between Sofwave Medical and Aura Investments

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

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

Diversification Opportunities for Sofwave Medical and Aura Investments

-0.01

Correlation Coefficient

Sofwave Medical  Aura Investments

Good diversification

The 3 months correlation between Sofwave and Aura is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sofwave Medical and Aura Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Investments 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 Aura Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Investments has no effect on the direction of Sofwave Medical i.e., Sofwave Medical and Aura Investments go up and down completely randomly.

Pair Corralation between Sofwave Medical and Aura Investments

Assuming the 90 days trading horizon Sofwave Medical is expected to generate 1.46 times more return on investment than Aura Investments. However, Sofwave Medical is 1.46 times more volatile than Aura Investments. It trades about 0.04 of its potential returns per unit of risk. Aura Investments is currently generating about -0.14 per unit of risk. If you would invest  153,600  in Sofwave Medical on December 30, 2024 and sell it today you would earn a total of  5,400  from holding Sofwave Medical or generate 3.52% return on investment over 90 days.

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

Sofwave Medical  vs.  Aura Investments

Sofwave Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sofwave Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sofwave Medical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aura Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aura Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sofwave Medical and Aura Investments

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

The idea behind Sofwave Medical and Aura Investments 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 Commodity Directory module to find actively traded commodities issued by global exchanges.