Correlation Between Catalent and Elanco Animal
Can any of the company-specific risk be diversified away by investing in both Catalent and Elanco Animal 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 Catalent and Elanco Animal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalent and Elanco Animal Health, you can compare the effects of market volatilities on Catalent and Elanco Animal 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 Catalent with a short position of Elanco Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and Elanco Animal.
Diversification Opportunities for Catalent and Elanco Animal
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Catalent and Elanco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health and Catalent 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 Catalent are associated (or correlated) with Elanco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of Catalent i.e., Catalent and Elanco Animal go up and down completely randomly.
Pair Corralation between Catalent and Elanco Animal
Given the investment horizon of 90 days Catalent is expected to generate 15.98 times less return on investment than Elanco Animal. But when comparing it to its historical volatility, Catalent is 4.32 times less risky than Elanco Animal. It trades about 0.03 of its potential returns per unit of risk. Elanco Animal Health is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,251 in Elanco Animal Health on August 24, 2024 and sell it today you would earn a total of 89.00 from holding Elanco Animal Health or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catalent vs. Elanco Animal Health
Performance |
| Timeline |
| Catalent |
| Elanco Animal Health |
Catalent and Elanco Animal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catalent and Elanco Animal
The main advantage of trading using opposite Catalent and Elanco Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent position performs unexpectedly, Elanco Animal 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 Elanco Animal will offset losses from the drop in Elanco Animal's long position.| Catalent vs. Sunshine Biopharma | Catalent vs. Thayer Ventures Acquisition | Catalent vs. Biofrontera Warrants | Catalent vs. Neurosense Therapeutics |
| Elanco Animal vs. Viatris | Elanco Animal vs. Catalent | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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