Correlation Between Catalent and Grand Canyon

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

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

Diversification Opportunities for Catalent and Grand Canyon

0.61

Correlation Coefficient

Catalent  Grand Canyon

Poor diversification

The 3 months correlation between Catalent and Grand is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education 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 Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of Catalent i.e., Catalent and Grand Canyon go up and down completely randomly.

Pair Corralation between Catalent and Grand Canyon

Assuming the 90 days horizon Catalent is expected to generate 1.95 times more return on investment than Grand Canyon. However, Catalent is 1.95 times more volatile than Grand Canyon Education. It trades about 0.03 of its potential returns per unit of risk. Grand Canyon Education is currently generating about 0.06 per unit of risk. If you would invest  4,502  in Catalent on October 4, 2024 and sell it today you would earn a total of  1,491  from holding Catalent or generate 33.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.0%
Values	Daily Returns

Catalent  vs.  Grand Canyon Education

Catalent

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Grand Canyon Education

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and Grand Canyon

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

The idea behind Catalent and Grand Canyon Education 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.