Correlation Between Malvern International and CATLIN GROUP

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

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

Diversification Opportunities for Malvern International and CATLIN GROUP

-0.42

Correlation Coefficient

Malvern International  CATLIN GROUP

Very good diversification

The 3 months correlation between Malvern and CATLIN is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Malvern International and CATLIN GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATLIN GROUP and Malvern International 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 Malvern International are associated (or correlated) with CATLIN GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CATLIN GROUP has no effect on the direction of Malvern International i.e., Malvern International and CATLIN GROUP go up and down completely randomly.

Pair Corralation between Malvern International and CATLIN GROUP

Assuming the 90 days trading horizon Malvern International is expected to generate 3.13 times more return on investment than CATLIN GROUP. However, Malvern International is 3.13 times more volatile than CATLIN GROUP . It trades about 0.1 of its potential returns per unit of risk. CATLIN GROUP is currently generating about -0.12 per unit of risk. If you would invest  1,900  in Malvern International on September 12, 2024 and sell it today you would earn a total of  300.00  from holding Malvern International or generate 15.79% return on investment over 90 days.

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

Malvern International  vs.  CATLIN GROUP

Malvern International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Malvern International unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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.

Pair Trading with Malvern International and CATLIN GROUP

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

The idea behind Malvern International and CATLIN GROUP 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.