Correlation Between SOFTWARE MANSION and Action SA

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

By analyzing existing cross correlation between SOFTWARE MANSION SPOLKA and Action SA, you can compare the effects of market volatilities on SOFTWARE MANSION and Action SA 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 SOFTWARE MANSION with a short position of Action SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFTWARE MANSION and Action SA.

Diversification Opportunities for SOFTWARE MANSION and Action SA

0.32

Correlation Coefficient

SOFTWARE MANSION  Action SA

Weak diversification

The 3 months correlation between SOFTWARE and Action is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SOFTWARE MANSION SPOLKA and Action SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action SA and SOFTWARE MANSION 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 SOFTWARE MANSION SPOLKA are associated (or correlated) with Action SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action SA has no effect on the direction of SOFTWARE MANSION i.e., SOFTWARE MANSION and Action SA go up and down completely randomly.

Pair Corralation between SOFTWARE MANSION and Action SA

Assuming the 90 days trading horizon SOFTWARE MANSION SPOLKA is expected to generate 3.29 times more return on investment than Action SA. However, SOFTWARE MANSION is 3.29 times more volatile than Action SA. It trades about 0.03 of its potential returns per unit of risk. Action SA is currently generating about 0.03 per unit of risk. If you would invest  2,896  in SOFTWARE MANSION SPOLKA on September 4, 2024 and sell it today you would earn a total of  154.00  from holding SOFTWARE MANSION SPOLKA or generate 5.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	51.42%
Values	Daily Returns

SOFTWARE MANSION SPOLKA  vs.  Action SA

SOFTWARE MANSION SPOLKA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOFTWARE MANSION SPOLKA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SOFTWARE MANSION is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Action SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Action SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with SOFTWARE MANSION and Action SA

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

The idea behind SOFTWARE MANSION SPOLKA and Action SA 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.