Correlation Between Catalent and STRAYER EDUCATION

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

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

Diversification Opportunities for Catalent and STRAYER EDUCATION

0.62

Correlation Coefficient

Catalent  STRAYER EDUCATION

Poor diversification

The 3 months correlation between Catalent and STRAYER is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER 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 STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of Catalent i.e., Catalent and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between Catalent and STRAYER EDUCATION

Assuming the 90 days horizon Catalent is expected to generate 0.39 times more return on investment than STRAYER EDUCATION. However, Catalent is 2.55 times less risky than STRAYER EDUCATION. It trades about 0.15 of its potential returns per unit of risk. STRAYER EDUCATION is currently generating about -0.03 per unit of risk. If you would invest  5,193  in Catalent on October 4, 2024 and sell it today you would earn a total of  800.00  from holding Catalent or generate 15.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.97%
Values	Daily Returns

Catalent  vs.  STRAYER 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.

STRAYER EDUCATION

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, STRAYER EDUCATION may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Catalent and STRAYER EDUCATION

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

The idea behind Catalent and STRAYER 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.