Correlation Between SoundHound and Investec

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

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

Diversification Opportunities for SoundHound and Investec

0.81

Correlation Coefficient

SoundHound  Investec

Very poor diversification

The 3 months correlation between SoundHound and Investec is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and Investec Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Group and SoundHound 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 SoundHound AI are associated (or correlated) with Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Group has no effect on the direction of SoundHound i.e., SoundHound and Investec go up and down completely randomly.

Pair Corralation between SoundHound and Investec

Given the investment horizon of 90 days SoundHound AI is expected to generate 12.95 times more return on investment than Investec. However, SoundHound is 12.95 times more volatile than Investec Group. It trades about 0.46 of its potential returns per unit of risk. Investec Group is currently generating about 0.22 per unit of risk. If you would invest  803.00  in SoundHound AI on September 24, 2024 and sell it today you would earn a total of  1,240  from holding SoundHound AI or generate 154.42% return on investment over 90 days.

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

SoundHound AI  vs.  Investec Group

SoundHound AI

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Investec Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Investec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SoundHound and Investec

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

The idea behind SoundHound AI and Investec Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.