Correlation Between Catella AB and Starbreeze

Can any of the company-specific risk be diversified away by investing in both Catella AB and Starbreeze 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 Starbreeze 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 Starbreeze AB, you can compare the effects of market volatilities on Catella AB and Starbreeze 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 Starbreeze. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catella AB and Starbreeze.

Diversification Opportunities for Catella AB and Starbreeze

0.68

Correlation Coefficient

Catella AB  Starbreeze

Poor diversification

The 3 months correlation between Catella and Starbreeze is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Catella AB A and Starbreeze AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbreeze 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 Starbreeze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbreeze AB has no effect on the direction of Catella AB i.e., Catella AB and Starbreeze go up and down completely randomly.

Pair Corralation between Catella AB and Starbreeze

Assuming the 90 days trading horizon Catella AB A is expected to generate 0.32 times more return on investment than Starbreeze. However, Catella AB A is 3.11 times less risky than Starbreeze. It trades about -0.11 of its potential returns per unit of risk. Starbreeze AB is currently generating about -0.04 per unit of risk. If you would invest  3,180  in Catella AB A on September 24, 2024 and sell it today you would lose (620.00) from holding Catella AB A or give up 19.5% of portfolio value over 90 days.

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

Catella AB A  vs.  Starbreeze AB

Catella AB A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catella AB A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Starbreeze AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbreeze AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Catella AB and Starbreeze

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

The idea behind Catella AB A and Starbreeze 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.