Correlation Between Catalent and COFCO Joycome

Can any of the company-specific risk be diversified away by investing in both Catalent and COFCO Joycome 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 Catalent and COFCO Joycome into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Catalent and COFCO Joycome Foods, you can compare the effects of market volatilities on Catalent and COFCO Joycome 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 Catalent with a short position of COFCO Joycome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and COFCO Joycome.

Diversification Opportunities for Catalent and COFCO Joycome

0.07

Correlation Coefficient

Catalent  COFCO Joycome

Significant diversification

The 3 months correlation between Catalent and COFCO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and COFCO Joycome Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFCO Joycome Foods and Catalent 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 Catalent are associated (or correlated) with COFCO Joycome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFCO Joycome Foods has no effect on the direction of Catalent i.e., Catalent and COFCO Joycome go up and down completely randomly.

Pair Corralation between Catalent and COFCO Joycome

Assuming the 90 days horizon Catalent is expected to generate 0.29 times more return on investment than COFCO Joycome. However, Catalent is 3.5 times less risky than COFCO Joycome. It trades about 0.41 of its potential returns per unit of risk. COFCO Joycome Foods is currently generating about 0.02 per unit of risk. If you would invest  5,548  in Catalent on September 22, 2024 and sell it today you would earn a total of  445.00  from holding Catalent or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Catalent  vs.  COFCO Joycome Foods

Catalent

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

COFCO Joycome Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COFCO Joycome Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, COFCO Joycome reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and COFCO Joycome

The main advantage of trading using opposite Catalent and COFCO Joycome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent position performs unexpectedly, COFCO Joycome 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 COFCO Joycome will offset losses from the drop in COFCO Joycome's long position.

The idea behind Catalent and COFCO Joycome Foods 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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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.