Correlation Between Firefly AB and CTT Systems

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

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

Diversification Opportunities for Firefly AB and CTT Systems

0.66

Correlation Coefficient

Firefly AB  CTT Systems

Poor diversification

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

Pair Corralation between Firefly AB and CTT Systems

Assuming the 90 days trading horizon Firefly AB is expected to generate 0.45 times more return on investment than CTT Systems. However, Firefly AB is 2.2 times less risky than CTT Systems. It trades about 0.16 of its potential returns per unit of risk. CTT Systems AB is currently generating about 0.07 per unit of risk. If you would invest  17,533  in Firefly AB on April 25, 2025 and sell it today you would earn a total of  2,467  from holding Firefly AB or generate 14.07% return on investment over 90 days.

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

Firefly AB  vs.  CTT Systems AB

Firefly AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Firefly AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Firefly AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 5 (%) 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.

Pair Trading with Firefly AB and CTT Systems

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

The idea behind Firefly AB and CTT Systems 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.