Correlation Between Castellum and Avanza Bank

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

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

Diversification Opportunities for Castellum and Avanza Bank

0.82

Correlation Coefficient

Castellum  Avanza Bank

Very poor diversification

The 3 months correlation between Castellum and Avanza is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Castellum AB and Avanza Bank Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanza Bank Holding and Castellum 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 Castellum AB are associated (or correlated) with Avanza Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanza Bank Holding has no effect on the direction of Castellum i.e., Castellum and Avanza Bank go up and down completely randomly.

Pair Corralation between Castellum and Avanza Bank

Assuming the 90 days trading horizon Castellum AB is expected to under-perform the Avanza Bank. But the stock apears to be less risky and, when comparing its historical volatility, Castellum AB is 1.23 times less risky than Avanza Bank. The stock trades about -0.08 of its potential returns per unit of risk. The Avanza Bank Holding is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  24,190  in Avanza Bank Holding on September 2, 2024 and sell it today you would lose (790.00) from holding Avanza Bank Holding or give up 3.27% of portfolio value over 90 days.

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

Castellum AB  vs.  Avanza Bank Holding

Castellum AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castellum 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.

Avanza Bank Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Castellum and Avanza Bank

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

The idea behind Castellum AB and Avanza Bank 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.