Correlation Between Duni AB and Catella AB

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

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

Diversification Opportunities for Duni AB and Catella AB

0.42

Correlation Coefficient

Duni AB  Catella AB

Very weak diversification

The 3 months correlation between Duni and Catella is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Duni AB and Catella AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catella AB and Duni AB 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 Duni AB are associated (or correlated) with Catella AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catella AB has no effect on the direction of Duni AB i.e., Duni AB and Catella AB go up and down completely randomly.

Pair Corralation between Duni AB and Catella AB

Assuming the 90 days trading horizon Duni AB is expected to generate 2.51 times less return on investment than Catella AB. But when comparing it to its historical volatility, Duni AB is 1.24 times less risky than Catella AB. It trades about 0.07 of its potential returns per unit of risk. Catella AB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,680  in Catella AB on December 22, 2024 and sell it today you would earn a total of  465.00  from holding Catella AB or generate 17.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Duni AB  vs.  Catella AB

Duni AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Duni AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Duni AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Catella AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catella AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Catella AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duni AB and Catella AB

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

The idea behind Duni AB and Catella 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.