Correlation Between Saab AB and CTT Systems

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

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

Diversification Opportunities for Saab AB and CTT Systems

-0.34

Correlation Coefficient

Saab AB  CTT Systems

Very good diversification

The 3 months correlation between Saab and CTT is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Saab AB and CTT Systems AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTT Systems AB and Saab 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 Saab AB are associated (or correlated) with CTT Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTT Systems AB has no effect on the direction of Saab AB i.e., Saab AB and CTT Systems go up and down completely randomly.

Pair Corralation between Saab AB and CTT Systems

Assuming the 90 days trading horizon Saab AB is expected to generate 1.17 times more return on investment than CTT Systems. However, Saab AB is 1.17 times more volatile than CTT Systems AB. It trades about 0.04 of its potential returns per unit of risk. CTT Systems AB is currently generating about -0.02 per unit of risk. If you would invest  22,829  in Saab AB on September 2, 2024 and sell it today you would earn a total of  1,056  from holding Saab AB or generate 4.63% return on investment over 90 days.

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

Saab AB  vs.  CTT Systems AB

Saab AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Saab AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Saab AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CTT Systems AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Saab AB and CTT Systems

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

The idea behind Saab AB and CTT Systems 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.