Correlation Between Tilray and Catalent
Can any of the company-specific risk be diversified away by investing in both Tilray 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 Tilray and Catalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tilray Inc and Catalent, you can compare the effects of market volatilities on Tilray 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 Tilray with a short position of Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tilray and Catalent.
Diversification Opportunities for Tilray and Catalent
Average diversification
The 3 months correlation between Tilray and Catalent is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tilray Inc and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and Tilray 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 Tilray Inc 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 Tilray i.e., Tilray and Catalent go up and down completely randomly.
Pair Corralation between Tilray and Catalent
Given the investment horizon of 90 days Tilray Inc is expected to under-perform the Catalent. In addition to that, Tilray is 4.98 times more volatile than Catalent. It trades about -0.2 of its total potential returns per unit of risk. Catalent is currently generating about 0.24 per unit of volatility. If you would invest 5,881 in Catalent on August 28, 2024 and sell it today you would earn a total of 248.00 from holding Catalent or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tilray Inc vs. Catalent
Performance |
| Timeline |
| Tilray Inc |
| Catalent |
Tilray and Catalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tilray and Catalent
The main advantage of trading using opposite Tilray and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tilray 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.The idea behind Tilray Inc and Catalent 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.| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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