Correlation Between CATLIN GROUP and Polar Capital

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

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

Diversification Opportunities for CATLIN GROUP and Polar Capital

-0.62

Correlation Coefficient

CATLIN GROUP  Polar Capital

Excellent diversification

The 3 months correlation between CATLIN and Polar is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and CATLIN GROUP 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 CATLIN GROUP are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of CATLIN GROUP i.e., CATLIN GROUP and Polar Capital go up and down completely randomly.

Pair Corralation between CATLIN GROUP and Polar Capital

Assuming the 90 days trading horizon CATLIN GROUP is expected to generate 1.89 times less return on investment than Polar Capital. In addition to that, CATLIN GROUP is 1.14 times more volatile than Polar Capital Technology. It trades about 0.04 of its total potential returns per unit of risk. Polar Capital Technology is currently generating about 0.09 per unit of volatility. If you would invest  23,300  in Polar Capital Technology on December 3, 2024 and sell it today you would earn a total of  10,300  from holding Polar Capital Technology or generate 44.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.7%
Values	Daily Returns

CATLIN GROUP   vs.  Polar Capital Technology

CATLIN GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CATLIN GROUP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Polar Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CATLIN GROUP and Polar Capital

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

The idea behind CATLIN GROUP and Polar Capital Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.