Correlation Between Aeorema Communications and CATLIN GROUP
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications 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 Aeorema Communications and CATLIN GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and CATLIN GROUP , you can compare the effects of market volatilities on Aeorema Communications 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 Aeorema Communications with a short position of CATLIN GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and CATLIN GROUP.
Diversification Opportunities for Aeorema Communications and CATLIN GROUP
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aeorema and CATLIN is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and CATLIN GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATLIN GROUP and Aeorema Communications 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 Aeorema Communications Plc 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 Aeorema Communications i.e., Aeorema Communications and CATLIN GROUP go up and down completely randomly.
Pair Corralation between Aeorema Communications and CATLIN GROUP
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the CATLIN GROUP. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 1.84 times less risky than CATLIN GROUP. The stock trades about -0.05 of its potential returns per unit of risk. The CATLIN GROUP is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,850 in CATLIN GROUP on September 3, 2024 and sell it today you would earn a total of 1,550 from holding CATLIN GROUP or generate 19.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. CATLIN GROUP
Performance |
| Timeline |
| Aeorema Communications |
| CATLIN GROUP |
Aeorema Communications and CATLIN GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and CATLIN GROUP
The main advantage of trading using opposite Aeorema Communications and CATLIN GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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.| Aeorema Communications vs. Creo Medical Group | Aeorema Communications vs. Grieg Seafood | Aeorema Communications vs. Medical Properties Trust | Aeorema Communications vs. CompuGroup Medical AG |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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