Correlation Between MedCap AB and Catella AB

Can any of the company-specific risk be diversified away by investing in both MedCap 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 MedCap 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 MedCap AB and Catella AB, you can compare the effects of market volatilities on MedCap 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 MedCap AB with a short position of Catella AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of MedCap AB and Catella AB.

Diversification Opportunities for MedCap AB and Catella AB

-0.51

Correlation Coefficient

MedCap AB  Catella AB

Excellent diversification

The 3 months correlation between MedCap and Catella is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding MedCap AB and Catella AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catella AB and MedCap 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 MedCap 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 MedCap AB i.e., MedCap AB and Catella AB go up and down completely randomly.

Pair Corralation between MedCap AB and Catella AB

Assuming the 90 days trading horizon MedCap AB is expected to under-perform the Catella AB. In addition to that, MedCap AB is 2.35 times more volatile than Catella AB. It trades about -0.16 of its total potential returns per unit of risk. Catella AB is currently generating about 0.12 per unit of volatility. If you would invest  2,785  in Catella AB on December 30, 2024 and sell it today you would earn a total of  415.00  from holding Catella AB or generate 14.9% return on investment over 90 days.

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

MedCap AB  vs.  Catella AB

MedCap AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days MedCap 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.

Catella AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catella AB are ranked lower than 9 (%) 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 MedCap AB and Catella AB

The main advantage of trading using opposite MedCap AB and Catella AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MedCap 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 MedCap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.