Correlation Between Catella AB and Ratos AB

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

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

Diversification Opportunities for Catella AB and Ratos AB

0.64

Correlation Coefficient

Catella AB  Ratos AB

Poor diversification

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

Pair Corralation between Catella AB and Ratos AB

Assuming the 90 days trading horizon Catella AB A is expected to generate 2.68 times more return on investment than Ratos AB. However, Catella AB is 2.68 times more volatile than Ratos AB. It trades about 0.07 of its potential returns per unit of risk. Ratos AB is currently generating about 0.11 per unit of risk. If you would invest  2,600  in Catella AB A on December 29, 2024 and sell it today you would earn a total of  400.00  from holding Catella AB A or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Catella AB A  vs.  Ratos AB

Catella AB A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Catella AB A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Catella AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ratos AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ratos AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Catella AB and Ratos AB

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

The idea behind Catella AB A and Ratos 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.