Correlation Between CATLIN GROUP and SMA Solar
Can any of the company-specific risk be diversified away by investing in both CATLIN GROUP and SMA Solar 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 CATLIN GROUP and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CATLIN GROUP and SMA Solar Technology, you can compare the effects of market volatilities on CATLIN GROUP and SMA Solar 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 CATLIN GROUP with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of CATLIN GROUP and SMA Solar.
Diversification Opportunities for CATLIN GROUP and SMA Solar
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CATLIN and SMA is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and CATLIN GROUP 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 CATLIN GROUP are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of CATLIN GROUP i.e., CATLIN GROUP and SMA Solar go up and down completely randomly.
Pair Corralation between CATLIN GROUP and SMA Solar
Assuming the 90 days trading horizon CATLIN GROUP is expected to generate 0.12 times more return on investment than SMA Solar. However, CATLIN GROUP is 8.54 times less risky than SMA Solar. It trades about -0.54 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.39 per unit of risk. If you would invest 9,050 in CATLIN GROUP on January 13, 2025 and sell it today you would lose (750.00) from holding CATLIN GROUP or give up 8.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CATLIN GROUP vs. SMA Solar Technology
Performance |
| Timeline |
| CATLIN GROUP |
| SMA Solar Technology |
CATLIN GROUP and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CATLIN GROUP and SMA Solar
The main advantage of trading using opposite CATLIN GROUP and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CATLIN GROUP position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| CATLIN GROUP vs. Smithson Investment Trust | CATLIN GROUP vs. Darden Restaurants | CATLIN GROUP vs. Gear4music Plc | CATLIN GROUP vs. Universal Music Group |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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