Correlation Between CTT Systems and W5 Solutions
Can any of the company-specific risk be diversified away by investing in both CTT Systems and W5 Solutions 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 CTT Systems and W5 Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTT Systems AB and W5 Solutions AB, you can compare the effects of market volatilities on CTT Systems and W5 Solutions 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 CTT Systems with a short position of W5 Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTT Systems and W5 Solutions.
Diversification Opportunities for CTT Systems and W5 Solutions
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTT and W5 Solutions is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CTT Systems AB and W5 Solutions AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W5 Solutions AB and CTT Systems 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 CTT Systems AB are associated (or correlated) with W5 Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W5 Solutions AB has no effect on the direction of CTT Systems i.e., CTT Systems and W5 Solutions go up and down completely randomly.
Pair Corralation between CTT Systems and W5 Solutions
Assuming the 90 days trading horizon CTT Systems AB is expected to generate 0.62 times more return on investment than W5 Solutions. However, CTT Systems AB is 1.61 times less risky than W5 Solutions. It trades about 0.03 of its potential returns per unit of risk. W5 Solutions AB is currently generating about 0.0 per unit of risk. If you would invest 21,326 in CTT Systems AB on September 2, 2024 and sell it today you would earn a total of 5,274 from holding CTT Systems AB or generate 24.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTT Systems AB vs. W5 Solutions AB
Performance |
| Timeline |
| CTT Systems AB |
| W5 Solutions AB |
CTT Systems and W5 Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTT Systems and W5 Solutions
The main advantage of trading using opposite CTT Systems and W5 Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTT Systems position performs unexpectedly, W5 Solutions 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 W5 Solutions will offset losses from the drop in W5 Solutions' long position.The idea behind CTT Systems AB and W5 Solutions 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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