Correlation Between Catalyst/warrington and Catalyst/smh High
Can any of the company-specific risk be diversified away by investing in both Catalyst/warrington and Catalyst/smh High 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/warrington and Catalyst/smh High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalystwarrington Strategic Program and Catalystsmh High Income, you can compare the effects of market volatilities on Catalyst/warrington and Catalyst/smh High 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/warrington with a short position of Catalyst/smh High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst/warrington and Catalyst/smh High.
Diversification Opportunities for Catalyst/warrington and Catalyst/smh High
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Catalyst/warrington and CATALYST/SMH is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Catalystwarrington Strategic P and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income and Catalyst/warrington 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 Catalystwarrington Strategic Program are associated (or correlated) with Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of Catalyst/warrington i.e., Catalyst/warrington and Catalyst/smh High go up and down completely randomly.
Pair Corralation between Catalyst/warrington and Catalyst/smh High
Assuming the 90 days horizon Catalystwarrington Strategic Program is expected to under-perform the Catalyst/smh High. But the mutual fund apears to be less risky and, when comparing its historical volatility, Catalystwarrington Strategic Program is 6.58 times less risky than Catalyst/smh High. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Catalystsmh High Income is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 370.00 in Catalystsmh High Income on September 1, 2024 and sell it today you would earn a total of 8.00 from holding Catalystsmh High Income or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Catalystwarrington Strategic P vs. Catalystsmh High Income
Performance |
| Timeline |
| Catalyst/warrington |
| Catalystsmh High Income |
Catalyst/warrington and Catalyst/smh High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catalyst/warrington and Catalyst/smh High
The main advantage of trading using opposite Catalyst/warrington and Catalyst/smh High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst/warrington position performs unexpectedly, Catalyst/smh High 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/smh High will offset losses from the drop in Catalyst/smh High's long position.The idea behind Catalystwarrington Strategic Program and Catalystsmh High Income 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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