Correlation Between Catalyst/smh High and Mesirow Financial
Can any of the company-specific risk be diversified away by investing in both Catalyst/smh High and Mesirow Financial 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/smh High and Mesirow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalystsmh High Income and Mesirow Financial High, you can compare the effects of market volatilities on Catalyst/smh High and Mesirow Financial 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/smh High with a short position of Mesirow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst/smh High and Mesirow Financial.
Diversification Opportunities for Catalyst/smh High and Mesirow Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Catalyst/smh and Mesirow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Catalystsmh High Income and Mesirow Financial High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Financial High and Catalyst/smh High 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 Catalystsmh High Income are associated (or correlated) with Mesirow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Financial High has no effect on the direction of Catalyst/smh High i.e., Catalyst/smh High and Mesirow Financial go up and down completely randomly.
Pair Corralation between Catalyst/smh High and Mesirow Financial
Assuming the 90 days horizon Catalyst/smh High is expected to generate 1.09 times less return on investment than Mesirow Financial. In addition to that, Catalyst/smh High is 1.79 times more volatile than Mesirow Financial High. It trades about 0.11 of its total potential returns per unit of risk. Mesirow Financial High is currently generating about 0.21 per unit of volatility. If you would invest 699.00 in Mesirow Financial High on October 13, 2024 and sell it today you would earn a total of 151.00 from holding Mesirow Financial High or generate 21.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catalystsmh High Income vs. Mesirow Financial High
Performance |
| Timeline |
| Catalystsmh High Income |
| Mesirow Financial High |
Catalyst/smh High and Mesirow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catalyst/smh High and Mesirow Financial
The main advantage of trading using opposite Catalyst/smh High and Mesirow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst/smh High position performs unexpectedly, Mesirow Financial 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 Mesirow Financial will offset losses from the drop in Mesirow Financial's long position.The idea behind Catalystsmh High Income and Mesirow Financial High 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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