Correlation Between Industrivarden and Catella AB

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

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

Diversification Opportunities for Industrivarden and Catella AB

0.06

Correlation Coefficient

Industrivarden  Catella AB

Significant diversification

The 3 months correlation between Industrivarden and Catella is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and Catella AB A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catella AB A and Industrivarden 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 Industrivarden AB ser 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 A has no effect on the direction of Industrivarden i.e., Industrivarden and Catella AB go up and down completely randomly.

Pair Corralation between Industrivarden and Catella AB

Assuming the 90 days trading horizon Industrivarden AB ser is expected to generate 0.37 times more return on investment than Catella AB. However, Industrivarden AB ser is 2.73 times less risky than Catella AB. It trades about 0.06 of its potential returns per unit of risk. Catella AB A is currently generating about -0.04 per unit of risk. If you would invest  35,500  in Industrivarden AB ser on September 4, 2024 and sell it today you would earn a total of  1,140  from holding Industrivarden AB ser or generate 3.21% return on investment over 90 days.

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

Industrivarden AB ser  vs.  Catella AB A

Industrivarden AB ser

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Industrivarden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Catella AB A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catella AB A 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 Industrivarden and Catella AB

The main advantage of trading using opposite Industrivarden and Catella AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrivarden 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 Industrivarden AB ser and Catella AB A 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..