Correlation Between CATLIN GROUP and EVS Broadcast

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

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

Diversification Opportunities for CATLIN GROUP and EVS Broadcast

0.63

Correlation Coefficient

CATLIN GROUP  EVS Broadcast

Poor diversification

The 3 months correlation between CATLIN and EVS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment and CATLIN GROUP 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 CATLIN GROUP are associated (or correlated) with EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of CATLIN GROUP i.e., CATLIN GROUP and EVS Broadcast go up and down completely randomly.

Pair Corralation between CATLIN GROUP and EVS Broadcast

Assuming the 90 days trading horizon CATLIN GROUP is expected to under-perform the EVS Broadcast. But the stock apears to be less risky and, when comparing its historical volatility, CATLIN GROUP is 1.42 times less risky than EVS Broadcast. The stock trades about -0.11 of its potential returns per unit of risk. The EVS Broadcast Equipment is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,953  in EVS Broadcast Equipment on September 4, 2024 and sell it today you would lose (133.00) from holding EVS Broadcast Equipment or give up 4.5% of portfolio value over 90 days.

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

CATLIN GROUP   vs.  EVS Broadcast Equipment

CATLIN GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

EVS Broadcast Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CATLIN GROUP and EVS Broadcast

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

The idea behind CATLIN GROUP and EVS Broadcast Equipment 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.