Correlation Between BTS Group and Catella AB

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

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

Diversification Opportunities for BTS Group and Catella AB

0.83

Correlation Coefficient

BTS Group  Catella AB

Very poor diversification

The 3 months correlation between BTS and Catella is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BTS Group AB and Catella AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catella AB and BTS 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 BTS Group AB are associated (or correlated) with Catella AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catella AB has no effect on the direction of BTS Group i.e., BTS Group and Catella AB go up and down completely randomly.

Pair Corralation between BTS Group and Catella AB

Assuming the 90 days trading horizon BTS Group AB is expected to generate 1.27 times more return on investment than Catella AB. However, BTS Group is 1.27 times more volatile than Catella AB. It trades about 0.01 of its potential returns per unit of risk. Catella AB is currently generating about -0.02 per unit of risk. If you would invest  29,169  in BTS Group AB on October 10, 2024 and sell it today you would lose (1,769) from holding BTS Group AB or give up 6.06% of portfolio value over 90 days.

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

BTS Group AB  vs.  Catella AB

BTS Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTS Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BTS Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Catella AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catella AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Pair Trading with BTS Group and Catella AB

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

The idea behind BTS Group AB and Catella 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.