Correlation Between SA Catana and Fountaine Pajo

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

Diversification Opportunities for SA Catana and Fountaine Pajo

-0.08

Correlation Coefficient

SA Catana  Fountaine Pajo

Good diversification

The 3 months correlation between CATG and Fountaine is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding SA Catana Group and Fountaine Pajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountaine Pajo 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 Fountaine Pajo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountaine Pajo has no effect on the direction of SA Catana i.e., SA Catana and Fountaine Pajo go up and down completely randomly.

Pair Corralation between SA Catana and Fountaine Pajo

Assuming the 90 days trading horizon SA Catana Group is expected to generate 1.26 times more return on investment than Fountaine Pajo. However, SA Catana is 1.26 times more volatile than Fountaine Pajo. It trades about -0.01 of its potential returns per unit of risk. Fountaine Pajo is currently generating about -0.11 per unit of risk. If you would invest  500.00  in SA Catana Group on September 5, 2024 and sell it today you would lose (15.00) from holding SA Catana Group or give up 3.0% of portfolio value over 90 days.

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

SA Catana Group  vs.  Fountaine Pajo

SA Catana Group

Risk-Adjusted Performance

0 of 100

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.

Fountaine Pajo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fountaine Pajo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with SA Catana and Fountaine Pajo

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

The idea behind SA Catana Group and Fountaine Pajo 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.