Correlation Between Catalyst Dynamic and Global Opportunity
Can any of the company-specific risk be diversified away by investing in both Catalyst Dynamic and Global Opportunity 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 Catalyst Dynamic and Global Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalyst Dynamic Alpha and Global Opportunity Portfolio, you can compare the effects of market volatilities on Catalyst Dynamic and Global Opportunity 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 Catalyst Dynamic with a short position of Global Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst Dynamic and Global Opportunity.
Diversification Opportunities for Catalyst Dynamic and Global Opportunity
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Catalyst and Global is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Dynamic Alpha and Global Opportunity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunity and Catalyst Dynamic 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 Catalyst Dynamic Alpha are associated (or correlated) with Global Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunity has no effect on the direction of Catalyst Dynamic i.e., Catalyst Dynamic and Global Opportunity go up and down completely randomly.
Pair Corralation between Catalyst Dynamic and Global Opportunity
Assuming the 90 days horizon Catalyst Dynamic is expected to generate 1.4 times less return on investment than Global Opportunity. But when comparing it to its historical volatility, Catalyst Dynamic Alpha is 1.5 times less risky than Global Opportunity. It trades about 0.07 of its potential returns per unit of risk. Global Opportunity Portfolio is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,630 in Global Opportunity Portfolio on September 3, 2024 and sell it today you would earn a total of 1,290 from holding Global Opportunity Portfolio or generate 49.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catalyst Dynamic Alpha vs. Global Opportunity Portfolio
Performance |
| Timeline |
| Catalyst Dynamic Alpha |
| Global Opportunity |
Catalyst Dynamic and Global Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catalyst Dynamic and Global Opportunity
The main advantage of trading using opposite Catalyst Dynamic and Global Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst Dynamic position performs unexpectedly, Global Opportunity 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 Global Opportunity will offset losses from the drop in Global Opportunity's long position.| Catalyst Dynamic vs. Catalyst Dynamic Alpha | Catalyst Dynamic vs. Nasdaq 100 Fund Class | Catalyst Dynamic vs. Select Fund C | Catalyst Dynamic vs. Nasdaq 100 Fund Class |
| Global Opportunity vs. Morgan Stanley Multi | Global Opportunity vs. Growth Portfolio Class | Global Opportunity vs. Morgan Stanley Insti | Global Opportunity vs. Virtus Kar Small Cap |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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