Correlation Between Sotkamo Silver and Lemonsoft Oyj

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

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

Diversification Opportunities for Sotkamo Silver and Lemonsoft Oyj

-0.36

Correlation Coefficient

Sotkamo Silver  Lemonsoft Oyj

Very good diversification

The 3 months correlation between Sotkamo and Lemonsoft is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sotkamo Silver AB and Lemonsoft Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonsoft Oyj and Sotkamo Silver 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 Sotkamo Silver AB are associated (or correlated) with Lemonsoft Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonsoft Oyj has no effect on the direction of Sotkamo Silver i.e., Sotkamo Silver and Lemonsoft Oyj go up and down completely randomly.

Pair Corralation between Sotkamo Silver and Lemonsoft Oyj

Assuming the 90 days trading horizon Sotkamo Silver AB is expected to generate 1.74 times more return on investment than Lemonsoft Oyj. However, Sotkamo Silver is 1.74 times more volatile than Lemonsoft Oyj. It trades about 0.29 of its potential returns per unit of risk. Lemonsoft Oyj is currently generating about -0.01 per unit of risk. If you would invest  6.95  in Sotkamo Silver AB on March 5, 2024 and sell it today you would earn a total of  10.05  from holding Sotkamo Silver AB or generate 144.6% return on investment over 90 days.

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

Sotkamo Silver AB  vs.  Lemonsoft Oyj

Sotkamo Silver AB

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sotkamo Silver AB are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Sotkamo Silver demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Lemonsoft Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lemonsoft Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Lemonsoft Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sotkamo Silver and Lemonsoft Oyj

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

The idea behind Sotkamo Silver AB and Lemonsoft Oyj 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..