Correlation Between SA Catana and Boa Concept

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

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

Diversification Opportunities for SA Catana and Boa Concept

-0.05

Correlation Coefficient

SA Catana  Boa Concept

Good diversification

The 3 months correlation between CATG and Boa is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SA Catana Group and Boa Concept SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boa Concept SA and SA Catana 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 SA Catana Group are associated (or correlated) with Boa Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boa Concept SA has no effect on the direction of SA Catana i.e., SA Catana and Boa Concept go up and down completely randomly.

Pair Corralation between SA Catana and Boa Concept

Assuming the 90 days trading horizon SA Catana Group is expected to under-perform the Boa Concept. But the stock apears to be less risky and, when comparing its historical volatility, SA Catana Group is 1.55 times less risky than Boa Concept. The stock trades about -0.03 of its potential returns per unit of risk. The Boa Concept SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,725  in Boa Concept SA on December 28, 2024 and sell it today you would earn a total of  415.00  from holding Boa Concept SA or generate 24.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

SA Catana Group  vs.  Boa Concept SA

SA Catana Group

Risk-Adjusted Performance

Very Weak

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

Boa Concept SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boa Concept SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Boa Concept reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SA Catana and Boa Concept

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

The idea behind SA Catana Group and Boa Concept SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.