Correlation Between Aberforth Smaller and Catalyst Media

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

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

Diversification Opportunities for Aberforth Smaller and Catalyst Media

0.64

Correlation Coefficient

Aberforth Smaller  Catalyst Media

Poor diversification

The 3 months correlation between Aberforth and Catalyst is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aberforth Smaller Companies and Catalyst Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Media Group and Aberforth Smaller 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 Aberforth Smaller Companies are associated (or correlated) with Catalyst Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Media Group has no effect on the direction of Aberforth Smaller i.e., Aberforth Smaller and Catalyst Media go up and down completely randomly.

Pair Corralation between Aberforth Smaller and Catalyst Media

Assuming the 90 days trading horizon Aberforth Smaller Companies is expected to generate 0.26 times more return on investment than Catalyst Media. However, Aberforth Smaller Companies is 3.79 times less risky than Catalyst Media. It trades about -0.43 of its potential returns per unit of risk. Catalyst Media Group is currently generating about -0.27 per unit of risk. If you would invest  142,200  in Aberforth Smaller Companies on December 5, 2024 and sell it today you would lose (10,000) from holding Aberforth Smaller Companies or give up 7.03% of portfolio value over 90 days.

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

Aberforth Smaller Companies  vs.  Catalyst Media Group

Aberforth Smaller

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Catalyst Media Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalyst Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aberforth Smaller and Catalyst Media

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

The idea behind Aberforth Smaller Companies and Catalyst Media Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.