Correlation Between Catena Media and Vitec Software
Can any of the company-specific risk be diversified away by investing in both Catena Media and Vitec Software 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 Vitec Software 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 Vitec Software Group, you can compare the effects of market volatilities on Catena Media and Vitec Software 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 Vitec Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catena Media and Vitec Software.
Diversification Opportunities for Catena Media and Vitec Software
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Catena and Vitec is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Catena Media plc and Vitec Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitec Software Group 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 Vitec Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitec Software Group has no effect on the direction of Catena Media i.e., Catena Media and Vitec Software go up and down completely randomly.
Pair Corralation between Catena Media and Vitec Software
Assuming the 90 days trading horizon Catena Media plc is expected to under-perform the Vitec Software. In addition to that, Catena Media is 2.61 times more volatile than Vitec Software Group. It trades about -0.13 of its total potential returns per unit of risk. Vitec Software Group is currently generating about 0.15 per unit of volatility. If you would invest 46,020 in Vitec Software Group on September 2, 2024 and sell it today you would earn a total of 2,840 from holding Vitec Software Group or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catena Media plc vs. Vitec Software Group
Performance |
| Timeline |
| Catena Media plc |
| Vitec Software Group |
Catena Media and Vitec Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catena Media and Vitec Software
The main advantage of trading using opposite Catena Media and Vitec Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catena Media position performs unexpectedly, Vitec Software 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 Vitec Software will offset losses from the drop in Vitec Software's long position.The idea behind Catena Media plc and Vitec Software 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.| Vitec Software vs. Catena Media plc | Vitec Software vs. Kambi Group PLC | Vitec Software vs. Betsson AB | Vitec Software vs. Invisio Communications AB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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