Correlation Between CTT Systems and Cavotec SA

Can any of the company-specific risk be diversified away by investing in both CTT Systems and Cavotec SA 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 Cavotec SA 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 Cavotec SA, you can compare the effects of market volatilities on CTT Systems and Cavotec SA 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 Cavotec SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTT Systems and Cavotec SA.

Diversification Opportunities for CTT Systems and Cavotec SA

0.66

Correlation Coefficient

CTT Systems  Cavotec SA

Poor diversification

The 3 months correlation between CTT and Cavotec is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CTT Systems AB and Cavotec SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavotec SA 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 Cavotec SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavotec SA has no effect on the direction of CTT Systems i.e., CTT Systems and Cavotec SA go up and down completely randomly.

Pair Corralation between CTT Systems and Cavotec SA

Assuming the 90 days trading horizon CTT Systems AB is expected to generate 0.89 times more return on investment than Cavotec SA. However, CTT Systems AB is 1.12 times less risky than Cavotec SA. It trades about 0.11 of its potential returns per unit of risk. Cavotec SA is currently generating about 0.05 per unit of risk. If you would invest  18,092  in CTT Systems AB on April 20, 2025 and sell it today you would earn a total of  3,658  from holding CTT Systems AB or generate 20.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

CTT Systems AB  vs.  Cavotec SA

CTT Systems AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTT Systems AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTT Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cavotec SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cavotec SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Cavotec SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTT Systems and Cavotec SA

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

The idea behind CTT Systems AB and Cavotec SA 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.

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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.