Correlation Between Fabege AB and Catena AB

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

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

Diversification Opportunities for Fabege AB and Catena AB

0.59

Correlation Coefficient

Fabege AB  Catena AB

Very weak diversification

The 3 months correlation between Fabege and Catena is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fabege AB and Catena AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catena AB and Fabege 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 Fabege AB are associated (or correlated) with Catena AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catena AB has no effect on the direction of Fabege AB i.e., Fabege AB and Catena AB go up and down completely randomly.

Pair Corralation between Fabege AB and Catena AB

Assuming the 90 days trading horizon Fabege AB is expected to generate 0.94 times more return on investment than Catena AB. However, Fabege AB is 1.06 times less risky than Catena AB. It trades about 0.0 of its potential returns per unit of risk. Catena AB is currently generating about -0.07 per unit of risk. If you would invest  8,234  in Fabege AB on December 30, 2024 and sell it today you would lose (59.00) from holding Fabege AB or give up 0.72% of portfolio value over 90 days.

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

Fabege AB  vs.  Catena AB

Fabege AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fabege AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fabege AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Catena AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catena AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Fabege AB and Catena AB

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

The idea behind Fabege AB and Catena 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..