Correlation Between Catalyst Pharmaceuticals and Sun Life

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

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

Diversification Opportunities for Catalyst Pharmaceuticals and Sun Life

0.45

Correlation Coefficient

Catalyst Pharmaceuticals  Sun Life

Very weak diversification

The 3 months correlation between Catalyst and Sun is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Pharmaceuticals and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Catalyst Pharmaceuticals i.e., Catalyst Pharmaceuticals and Sun Life go up and down completely randomly.

Pair Corralation between Catalyst Pharmaceuticals and Sun Life

Given the investment horizon of 90 days Catalyst Pharmaceuticals is expected to generate 2.63 times more return on investment than Sun Life. However, Catalyst Pharmaceuticals is 2.63 times more volatile than Sun Life Financial. It trades about 0.08 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.09 per unit of risk. If you would invest  1,371  in Catalyst Pharmaceuticals on September 14, 2024 and sell it today you would earn a total of  767.00  from holding Catalyst Pharmaceuticals or generate 55.94% return on investment over 90 days.

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

Catalyst Pharmaceuticals  vs.  Sun Life Financial

Catalyst Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Catalyst Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sun Life Financial

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Catalyst Pharmaceuticals and Sun Life

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

The idea behind Catalyst Pharmaceuticals and Sun Life Financial 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.