Correlation Between South American and Catalent
Can any of the company-specific risk be diversified away by investing in both South American 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 South American and Catalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South American Gold and Catalent, you can compare the effects of market volatilities on South American 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 South American with a short position of Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of South American and Catalent.
Diversification Opportunities for South American and Catalent
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between South and Catalent is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding South American Gold and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and South American 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 South American Gold 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 South American i.e., South American and Catalent go up and down completely randomly.
Pair Corralation between South American and Catalent
Given the investment horizon of 90 days South American Gold is expected to generate 91.51 times more return on investment than Catalent. However, South American is 91.51 times more volatile than Catalent. It trades about 0.11 of its potential returns per unit of risk. Catalent is currently generating about 0.15 per unit of risk. If you would invest 0.01 in South American Gold on September 3, 2024 and sell it today you would lose (0.01) from holding South American Gold or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
South American Gold vs. Catalent
Performance |
| Timeline |
| South American Gold |
| Catalent |
South American and Catalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South American and Catalent
The main advantage of trading using opposite South American and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South American 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.| South American vs. Pacira BioSciences, | South American vs. Collegium Pharmaceutical | South American vs. Prestige Brand Holdings | South American vs. Phibro Animal Health |
| Catalent vs. IQVIA Holdings | Catalent vs. West Pharmaceutical Services | Catalent vs. Charles River Laboratories | Catalent vs. Bio Rad Laboratories |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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