Correlation Between Centessa Pharmaceuticals and Catalyst Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Centessa Pharmaceuticals and Catalyst Pharmaceuticals 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 Centessa Pharmaceuticals and Catalyst Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centessa Pharmaceuticals PLC and Catalyst Pharmaceuticals, you can compare the effects of market volatilities on Centessa Pharmaceuticals and Catalyst Pharmaceuticals 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 Centessa Pharmaceuticals with a short position of Catalyst Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centessa Pharmaceuticals and Catalyst Pharmaceuticals.
Diversification Opportunities for Centessa Pharmaceuticals and Catalyst Pharmaceuticals
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Centessa and Catalyst is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC are associated (or correlated) with Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Catalyst Pharmaceuticals go up and down completely randomly.
Pair Corralation between Centessa Pharmaceuticals and Catalyst Pharmaceuticals
Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to generate 1.69 times more return on investment than Catalyst Pharmaceuticals. However, Centessa Pharmaceuticals is 1.69 times more volatile than Catalyst Pharmaceuticals. It trades about 0.14 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about -0.06 per unit of risk. If you would invest 1,551 in Centessa Pharmaceuticals PLC on August 28, 2024 and sell it today you would earn a total of 159.00 from holding Centessa Pharmaceuticals PLC or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centessa Pharmaceuticals PLC vs. Catalyst Pharmaceuticals
Performance |
| Timeline |
| Centessa Pharmaceuticals |
| Catalyst Pharmaceuticals |
Centessa Pharmaceuticals and Catalyst Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centessa Pharmaceuticals and Catalyst Pharmaceuticals
The main advantage of trading using opposite Centessa Pharmaceuticals and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centessa Pharmaceuticals position performs unexpectedly, Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals will offset losses from the drop in Catalyst Pharmaceuticals' long position.The idea behind Centessa Pharmaceuticals PLC and Catalyst Pharmaceuticals 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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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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