Correlation Between CDN IMPERIAL and Catalent

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

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

Diversification Opportunities for CDN IMPERIAL and Catalent

0.7

Correlation Coefficient

CDN IMPERIAL  Catalent

Poor diversification

The 3 months correlation between CDN and Catalent is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and CDN IMPERIAL 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 CDN IMPERIAL BANK 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 CDN IMPERIAL i.e., CDN IMPERIAL and Catalent go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Catalent

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 1.29 times more return on investment than Catalent. However, CDN IMPERIAL is 1.29 times more volatile than Catalent. It trades about 0.25 of its potential returns per unit of risk. Catalent is currently generating about 0.15 per unit of risk. If you would invest  4,285  in CDN IMPERIAL BANK on October 4, 2024 and sell it today you would earn a total of  1,654  from holding CDN IMPERIAL BANK or generate 38.6% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  Catalent

CDN IMPERIAL BANK

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with CDN IMPERIAL and Catalent

The main advantage of trading using opposite CDN IMPERIAL and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL 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 CDN IMPERIAL BANK 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .