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 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

0.7

Correlation Coefficient

Catella AB  Ratos AB

Poor diversification

The 3 months correlation between Catella and Ratos is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Catella AB 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 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 is expected to under-perform the Ratos AB. But the stock apears to be less risky and, when comparing its historical volatility, Catella AB is 1.17 times less risky than Ratos AB. The stock trades about -0.02 of its potential returns per unit of risk. The Ratos AB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,893  in Ratos AB on September 12, 2024 and sell it today you would lose (563.00) from holding Ratos AB or give up 14.46% of portfolio value over 90 days.

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

Catella AB  vs.  Ratos 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.

Ratos AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.