Correlation Between Transtema Group and Softronic

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

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

Diversification Opportunities for Transtema Group and Softronic

0.12

Correlation Coefficient

Transtema Group  Softronic

Average diversification

The 3 months correlation between Transtema and Softronic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Transtema Group AB and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB and Transtema Group 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 Transtema Group AB are associated (or correlated) with Softronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softronic AB has no effect on the direction of Transtema Group i.e., Transtema Group and Softronic go up and down completely randomly.

Pair Corralation between Transtema Group and Softronic

Assuming the 90 days trading horizon Transtema Group AB is expected to under-perform the Softronic. In addition to that, Transtema Group is 1.21 times more volatile than Softronic AB. It trades about -0.07 of its total potential returns per unit of risk. Softronic AB is currently generating about 0.02 per unit of volatility. If you would invest  2,265  in Softronic AB on December 27, 2024 and sell it today you would earn a total of  25.00  from holding Softronic AB or generate 1.1% return on investment over 90 days.

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

Transtema Group AB  vs.  Softronic AB

Transtema Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transtema Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Softronic AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Softronic AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Softronic is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Transtema Group and Softronic

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

The idea behind Transtema Group AB and Softronic AB 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.