Correlation Between Automatic Bank and Sofwave Medical

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

By analyzing existing cross correlation between Automatic Bank Services and Sofwave Medical, you can compare the effects of market volatilities on Automatic Bank and Sofwave Medical 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 Automatic Bank with a short position of Sofwave Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Bank and Sofwave Medical.

Diversification Opportunities for Automatic Bank and Sofwave Medical

-0.12

Correlation Coefficient

Automatic Bank  Sofwave Medical

Good diversification

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

Pair Corralation between Automatic Bank and Sofwave Medical

Assuming the 90 days trading horizon Automatic Bank is expected to generate 13.85 times less return on investment than Sofwave Medical. But when comparing it to its historical volatility, Automatic Bank Services is 1.25 times less risky than Sofwave Medical. It trades about 0.03 of its potential returns per unit of risk. Sofwave Medical is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  156,000  in Sofwave Medical on April 23, 2025 and sell it today you would earn a total of  91,700  from holding Sofwave Medical or generate 58.78% return on investment over 90 days.

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

Automatic Bank Services  vs.  Sofwave Medical

Automatic Bank Services

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Bank Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Automatic Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sofwave Medical

Risk-Adjusted Performance

Solid

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

Pair Trading with Automatic Bank and Sofwave Medical

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

The idea behind Automatic Bank Services and Sofwave Medical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.