Correlation Between Cavotec SA and Metacon AB

Can any of the company-specific risk be diversified away by investing in both Cavotec SA and Metacon AB 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 Cavotec SA and Metacon AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cavotec SA and Metacon AB, you can compare the effects of market volatilities on Cavotec SA and Metacon AB 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 Cavotec SA with a short position of Metacon AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cavotec SA and Metacon AB.

Diversification Opportunities for Cavotec SA and Metacon AB

0.6

Correlation Coefficient

Cavotec SA  Metacon AB

Poor diversification

The 3 months correlation between Cavotec and Metacon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cavotec SA and Metacon AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metacon AB and Cavotec SA 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 Cavotec SA are associated (or correlated) with Metacon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metacon AB has no effect on the direction of Cavotec SA i.e., Cavotec SA and Metacon AB go up and down completely randomly.

Pair Corralation between Cavotec SA and Metacon AB

Assuming the 90 days trading horizon Cavotec SA is expected to generate 4.48 times less return on investment than Metacon AB. But when comparing it to its historical volatility, Cavotec SA is 2.07 times less risky than Metacon AB. It trades about 0.09 of its potential returns per unit of risk. Metacon AB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Metacon AB on April 22, 2025 and sell it today you would earn a total of  14.00  from holding Metacon AB or generate 107.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cavotec SA  vs.  Metacon AB

Cavotec SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cavotec SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Cavotec SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Metacon AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metacon AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Metacon AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cavotec SA and Metacon AB

The main advantage of trading using opposite Cavotec SA and Metacon AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cavotec SA position performs unexpectedly, Metacon AB 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 Metacon AB will offset losses from the drop in Metacon AB's long position.

The idea behind Cavotec SA and Metacon 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 Transaction History module to view history of all your transactions and understand their impact on performance.