Correlation Between Catena AB and MIPS AB

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

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

Diversification Opportunities for Catena AB and MIPS AB

0.36

Correlation Coefficient

Catena AB  MIPS AB

Weak diversification

The 3 months correlation between Catena and MIPS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Catena AB and MIPS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIPS AB and Catena 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 Catena AB are associated (or correlated) with MIPS AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIPS AB has no effect on the direction of Catena AB i.e., Catena AB and MIPS AB go up and down completely randomly.

Pair Corralation between Catena AB and MIPS AB

Assuming the 90 days trading horizon Catena AB is expected to under-perform the MIPS AB. But the stock apears to be less risky and, when comparing its historical volatility, Catena AB is 1.37 times less risky than MIPS AB. The stock trades about -0.1 of its potential returns per unit of risk. The MIPS AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  48,420  in MIPS AB on November 29, 2024 and sell it today you would earn a total of  480.00  from holding MIPS AB or generate 0.99% return on investment over 90 days.

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

Catena AB  vs.  MIPS AB

Catena AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catena 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.

MIPS AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MIPS AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MIPS AB 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 Catena AB and MIPS AB

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

The idea behind Catena AB and MIPS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.