Correlation Between TFS FINANCIAL and Catalent
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL and Catalent 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 TFS FINANCIAL and Catalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and Catalent, you can compare the effects of market volatilities on TFS FINANCIAL and Catalent 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 TFS FINANCIAL with a short position of Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and Catalent.
Diversification Opportunities for TFS FINANCIAL and Catalent
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TFS and Catalent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and Catalent go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and Catalent
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 2.37 times less return on investment than Catalent. But when comparing it to its historical volatility, TFS FINANCIAL is 1.29 times less risky than Catalent. It trades about 0.03 of its potential returns per unit of risk. Catalent is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,085 in Catalent on September 12, 2024 and sell it today you would earn a total of 1,770 from holding Catalent or generate 43.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFS FINANCIAL vs. Catalent
Performance |
| Timeline |
| TFS FINANCIAL |
| Catalent |
TFS FINANCIAL and Catalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFS FINANCIAL and Catalent
The main advantage of trading using opposite TFS FINANCIAL and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL position performs unexpectedly, Catalent 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 Catalent will offset losses from the drop in Catalent's long position.| TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc |
| Catalent vs. TFS FINANCIAL | Catalent vs. Regions Financial | Catalent vs. Japan Asia Investment | Catalent vs. PT Bank Maybank |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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