Correlation Between Catalyst Pharmaceuticals and Star Equity

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

By analyzing existing cross correlation between Catalyst Pharmaceuticals and Star Equity Holdings, you can compare the effects of market volatilities on Catalyst Pharmaceuticals and Star Equity 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 Star Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst Pharmaceuticals and Star Equity.

Diversification Opportunities for Catalyst Pharmaceuticals and Star Equity

0.45

Correlation Coefficient

Catalyst Pharmaceuticals  Star Equity

Very weak diversification

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

Pair Corralation between Catalyst Pharmaceuticals and Star Equity

Given the investment horizon of 90 days Catalyst Pharmaceuticals is expected to generate 1.36 times less return on investment than Star Equity. But when comparing it to its historical volatility, Catalyst Pharmaceuticals is 1.15 times less risky than Star Equity. It trades about 0.09 of its potential returns per unit of risk. Star Equity Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Star Equity Holdings on December 29, 2024 and sell it today you would earn a total of  51.00  from holding Star Equity Holdings or generate 24.06% 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.  Star Equity Holdings

Catalyst Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Star Equity Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Star Equity Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Star Equity reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalyst Pharmaceuticals and Star Equity

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

The idea behind Catalyst Pharmaceuticals and Star Equity Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.