Correlation Between SOFTWARE MANSION and Skyline Investment

Can any of the company-specific risk be diversified away by investing in both SOFTWARE MANSION and Skyline Investment 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 Skyline Investment 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 Skyline Investment SA, you can compare the effects of market volatilities on SOFTWARE MANSION and Skyline Investment 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 Skyline Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFTWARE MANSION and Skyline Investment.

Diversification Opportunities for SOFTWARE MANSION and Skyline Investment

-0.06

Correlation Coefficient

SOFTWARE MANSION  Skyline Investment

Good diversification

The 3 months correlation between SOFTWARE and Skyline is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SOFTWARE MANSION SPOLKA and Skyline Investment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline Investment 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 Skyline Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline Investment has no effect on the direction of SOFTWARE MANSION i.e., SOFTWARE MANSION and Skyline Investment go up and down completely randomly.

Pair Corralation between SOFTWARE MANSION and Skyline Investment

Assuming the 90 days trading horizon SOFTWARE MANSION is expected to generate 1.15 times less return on investment than Skyline Investment. But when comparing it to its historical volatility, SOFTWARE MANSION SPOLKA is 1.02 times less risky than Skyline Investment. It trades about 0.06 of its potential returns per unit of risk. Skyline Investment SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Skyline Investment SA on November 29, 2024 and sell it today you would earn a total of  13.00  from holding Skyline Investment SA or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

SOFTWARE MANSION SPOLKA  vs.  Skyline Investment SA

SOFTWARE MANSION SPOLKA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SOFTWARE MANSION SPOLKA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, SOFTWARE MANSION may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Skyline Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline Investment SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Skyline Investment may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with SOFTWARE MANSION and Skyline Investment

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

The idea behind SOFTWARE MANSION SPOLKA and Skyline Investment 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.