Correlation Between Catella AB and Beijer Alma

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

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

Diversification Opportunities for Catella AB and Beijer Alma

0.15

Correlation Coefficient

Catella AB  Beijer Alma

Average diversification

The 3 months correlation between Catella and Beijer is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Catella AB and Beijer Alma AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijer Alma 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 are associated (or correlated) with Beijer Alma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijer Alma AB has no effect on the direction of Catella AB i.e., Catella AB and Beijer Alma go up and down completely randomly.

Pair Corralation between Catella AB and Beijer Alma

Assuming the 90 days trading horizon Catella AB is expected to under-perform the Beijer Alma. But the stock apears to be less risky and, when comparing its historical volatility, Catella AB is 1.15 times less risky than Beijer Alma. The stock trades about -0.07 of its potential returns per unit of risk. The Beijer Alma AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  17,260  in Beijer Alma AB on October 25, 2024 and sell it today you would lose (240.00) from holding Beijer Alma AB or give up 1.39% of portfolio value over 90 days.

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

Catella AB  vs.  Beijer Alma AB

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.

Beijer Alma AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijer Alma AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Beijer Alma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Catella AB and Beijer Alma

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

The idea behind Catella AB and Beijer Alma 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.