Correlation Between Sotkamo Silver and Aiforia Technologies

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

By analyzing existing cross correlation between Sotkamo Silver AB and Aiforia Technologies Oyj, you can compare the effects of market volatilities on Sotkamo Silver and Aiforia Technologies 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 Sotkamo Silver with a short position of Aiforia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotkamo Silver and Aiforia Technologies.

Diversification Opportunities for Sotkamo Silver and Aiforia Technologies

0.27

Correlation Coefficient

Sotkamo Silver  Aiforia Technologies

Modest diversification

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

Pair Corralation between Sotkamo Silver and Aiforia Technologies

Assuming the 90 days trading horizon Sotkamo Silver AB is expected to generate 1.37 times more return on investment than Aiforia Technologies. However, Sotkamo Silver is 1.37 times more volatile than Aiforia Technologies Oyj. It trades about 0.1 of its potential returns per unit of risk. Aiforia Technologies Oyj is currently generating about 0.08 per unit of risk. If you would invest  8.44  in Sotkamo Silver AB on December 25, 2024 and sell it today you would earn a total of  1.56  from holding Sotkamo Silver AB or generate 18.48% return on investment over 90 days.

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

Sotkamo Silver AB  vs.  Aiforia Technologies Oyj

Sotkamo Silver AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sotkamo Silver AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Sotkamo Silver demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Aiforia Technologies Oyj

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aiforia Technologies Oyj are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Aiforia Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sotkamo Silver and Aiforia Technologies

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

The idea behind Sotkamo Silver AB and Aiforia Technologies Oyj 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.