Correlation Between Arbonia AG and Softwareone Holding

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

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

Diversification Opportunities for Arbonia AG and Softwareone Holding

-0.17

Correlation Coefficient

Arbonia AG  Softwareone Holding

Good diversification

The 3 months correlation between Arbonia and Softwareone is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Arbonia AG and Softwareone Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softwareone Holding and Arbonia AG 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 Arbonia AG are associated (or correlated) with Softwareone Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softwareone Holding has no effect on the direction of Arbonia AG i.e., Arbonia AG and Softwareone Holding go up and down completely randomly.

Pair Corralation between Arbonia AG and Softwareone Holding

Assuming the 90 days trading horizon Arbonia AG is expected to generate 1.11 times more return on investment than Softwareone Holding. However, Arbonia AG is 1.11 times more volatile than Softwareone Holding. It trades about 0.04 of its potential returns per unit of risk. Softwareone Holding is currently generating about -0.03 per unit of risk. If you would invest  1,194  in Arbonia AG on January 29, 2024 and sell it today you would earn a total of  16.00  from holding Arbonia AG or generate 1.34% return on investment over 90 days.

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

Arbonia AG  vs.  Softwareone Holding

Arbonia AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbonia AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbonia AG showed solid returns over the last few months and may actually be approaching a breakup point.

Softwareone Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Softwareone Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Softwareone Holding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Arbonia AG and Softwareone Holding

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

The idea behind Arbonia AG and Softwareone Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.