Correlation Between Catalent and Swedish Orphan

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

By analyzing existing cross correlation between Catalent and Swedish Orphan Biovitrum, you can compare the effects of market volatilities on Catalent and Swedish Orphan 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 Swedish Orphan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and Swedish Orphan.

Diversification Opportunities for Catalent and Swedish Orphan

-0.32

Correlation Coefficient

Catalent  Swedish Orphan

Very good diversification

The 3 months correlation between Catalent and Swedish is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum 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 Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of Catalent i.e., Catalent and Swedish Orphan go up and down completely randomly.

Pair Corralation between Catalent and Swedish Orphan

Assuming the 90 days horizon Catalent is expected to generate 0.77 times more return on investment than Swedish Orphan. However, Catalent is 1.3 times less risky than Swedish Orphan. It trades about 0.41 of its potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.24 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 Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Catalent  vs.  Swedish Orphan Biovitrum

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.

Swedish Orphan Biovitrum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedish Orphan Biovitrum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Swedish Orphan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Catalent and Swedish Orphan

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

The idea behind Catalent and Swedish Orphan Biovitrum 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.