Correlation Between Catena Media and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both Catena Media and Gamma Communications 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 Catena Media and Gamma Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catena Media PLC and Gamma Communications PLC, you can compare the effects of market volatilities on Catena Media and Gamma Communications 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 Catena Media with a short position of Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catena Media and Gamma Communications.
Diversification Opportunities for Catena Media and Gamma Communications
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Catena and Gamma is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Catena Media PLC and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC and Catena Media 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 Catena Media PLC are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of Catena Media i.e., Catena Media and Gamma Communications go up and down completely randomly.
Pair Corralation between Catena Media and Gamma Communications
Assuming the 90 days trading horizon Catena Media PLC is expected to under-perform the Gamma Communications. In addition to that, Catena Media is 3.76 times more volatile than Gamma Communications PLC. It trades about -0.22 of its total potential returns per unit of risk. Gamma Communications PLC is currently generating about -0.08 per unit of volatility. If you would invest 161,000 in Gamma Communications PLC on September 2, 2024 and sell it today you would lose (3,000) from holding Gamma Communications PLC or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catena Media PLC vs. Gamma Communications PLC
Performance |
| Timeline |
| Catena Media PLC |
| Gamma Communications PLC |
Catena Media and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catena Media and Gamma Communications
The main advantage of trading using opposite Catena Media and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catena Media position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| Catena Media vs. Uniper SE | Catena Media vs. Mulberry Group PLC | Catena Media vs. London Security Plc | Catena Media vs. Triad Group PLC |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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