Correlation Between Wallenstam and Castellum

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

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

Diversification Opportunities for Wallenstam and Castellum

0.94

Correlation Coefficient

Wallenstam  Castellum

Almost no diversification

The 3 months correlation between Wallenstam and Castellum is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wallenstam AB and Castellum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castellum AB and Wallenstam 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 Wallenstam AB are associated (or correlated) with Castellum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castellum AB has no effect on the direction of Wallenstam i.e., Wallenstam and Castellum go up and down completely randomly.

Pair Corralation between Wallenstam and Castellum

Assuming the 90 days trading horizon Wallenstam AB is expected to generate 1.12 times more return on investment than Castellum. However, Wallenstam is 1.12 times more volatile than Castellum AB. It trades about -0.03 of its potential returns per unit of risk. Castellum AB is currently generating about -0.08 per unit of risk. If you would invest  5,339  in Wallenstam AB on September 2, 2024 and sell it today you would lose (199.00) from holding Wallenstam AB or give up 3.73% of portfolio value over 90 days.

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

Wallenstam AB  vs.  Castellum AB

Wallenstam AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallenstam AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Wallenstam is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Castellum AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castellum AB 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 Wallenstam and Castellum

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

The idea behind Wallenstam AB and Castellum 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.