Correlation Between Catena Media and Smart Eye

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

Diversification Opportunities for Catena Media and Smart Eye

0.05

Correlation Coefficient

Catena Media  Smart Eye

Significant diversification

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

Pair Corralation between Catena Media and Smart Eye

Assuming the 90 days trading horizon Catena Media plc is expected to under-perform the Smart Eye. But the stock apears to be less risky and, when comparing its historical volatility, Catena Media plc is 1.09 times less risky than Smart Eye. The stock trades about -0.15 of its potential returns per unit of risk. The Smart Eye AB is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  6,130  in Smart Eye AB on December 30, 2024 and sell it today you would lose (1,400) from holding Smart Eye AB or give up 22.84% of portfolio value over 90 days.

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

Catena Media plc  vs.  Smart Eye AB

Catena Media plc

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Smart Eye AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smart Eye AB 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Catena Media and Smart Eye

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

The idea behind Catena Media plc and Smart Eye 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .