Correlation Between Cabot and Danimer Scientific

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

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

Diversification Opportunities for Cabot and Danimer Scientific

0.07

Correlation Coefficient

Cabot  Danimer Scientific

Significant diversification

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

Pair Corralation between Cabot and Danimer Scientific

Considering the 90-day investment horizon Cabot is expected to generate 0.19 times more return on investment than Danimer Scientific. However, Cabot is 5.24 times less risky than Danimer Scientific. It trades about 0.08 of its potential returns per unit of risk. Danimer Scientific is currently generating about -0.1 per unit of risk. If you would invest  10,118  in Cabot on September 2, 2024 and sell it today you would earn a total of  844.00  from holding Cabot or generate 8.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cabot  vs.  Danimer Scientific

Cabot

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Cabot may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Danimer Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danimer Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Cabot and Danimer Scientific

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

The idea behind Cabot and Danimer Scientific 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.