Correlation Between Catena Media and Embracer Group

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

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

Diversification Opportunities for Catena Media and Embracer Group

-0.67

Correlation Coefficient

Catena Media  Embracer Group

Excellent diversification

The 3 months correlation between Catena and Embracer is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Catena Media plc and Embracer Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embracer Group AB and Catena Media 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 Media plc are associated (or correlated) with Embracer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embracer Group AB has no effect on the direction of Catena Media i.e., Catena Media and Embracer Group go up and down completely randomly.

Pair Corralation between Catena Media and Embracer Group

Assuming the 90 days trading horizon Catena Media plc is expected to under-perform the Embracer Group. In addition to that, Catena Media is 1.39 times more volatile than Embracer Group AB. It trades about -0.18 of its total potential returns per unit of risk. Embracer Group AB is currently generating about 0.13 per unit of volatility. If you would invest  2,320  in Embracer Group AB on September 3, 2024 and sell it today you would earn a total of  557.00  from holding Embracer Group AB or generate 24.01% return on investment over 90 days.

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

Catena Media plc  vs.  Embracer Group AB

Catena Media plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catena Media plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Embracer Group AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Embracer Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catena Media and Embracer Group

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

The idea behind Catena Media plc and Embracer Group 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.