Correlation Between Castellum and Grid Dynamics

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

By analyzing existing cross correlation between Castellum and Grid Dynamics Holdings, you can compare the effects of market volatilities on Castellum and Grid Dynamics 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 Castellum with a short position of Grid Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Castellum and Grid Dynamics.

Diversification Opportunities for Castellum and Grid Dynamics

0.65

Correlation Coefficient

Castellum  Grid Dynamics

Poor diversification

The 3 months correlation between Castellum and Grid is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Castellum and Grid Dynamics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Dynamics Holdings and Castellum 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 Castellum are associated (or correlated) with Grid Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Dynamics Holdings has no effect on the direction of Castellum i.e., Castellum and Grid Dynamics go up and down completely randomly.

Pair Corralation between Castellum and Grid Dynamics

Considering the 90-day investment horizon Castellum is expected to generate 3.58 times more return on investment than Grid Dynamics. However, Castellum is 3.58 times more volatile than Grid Dynamics Holdings. It trades about 0.05 of its potential returns per unit of risk. Grid Dynamics Holdings is currently generating about 0.05 per unit of risk. If you would invest  112.00  in Castellum on October 5, 2024 and sell it today you would earn a total of  65.00  from holding Castellum or generate 58.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Castellum  vs.  Grid Dynamics Holdings

Castellum

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Castellum are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Castellum displayed solid returns over the last few months and may actually be approaching a breakup point.

Grid Dynamics Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Dynamics Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Grid Dynamics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castellum and Grid Dynamics

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

The idea behind Castellum and Grid Dynamics Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.