Correlation Between Catalyst Pharmaceuticals and BROADCOM

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

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

Diversification Opportunities for Catalyst Pharmaceuticals and BROADCOM

-0.24

Correlation Coefficient

Catalyst Pharmaceuticals  BROADCOM

Very good diversification

The 3 months correlation between Catalyst and BROADCOM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Pharmaceuticals and BROADCOM P BROADCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADCOM P BROADCOM 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 BROADCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADCOM P BROADCOM has no effect on the direction of Catalyst Pharmaceuticals i.e., Catalyst Pharmaceuticals and BROADCOM go up and down completely randomly.

Pair Corralation between Catalyst Pharmaceuticals and BROADCOM

Given the investment horizon of 90 days Catalyst Pharmaceuticals is expected to generate 15.9 times more return on investment than BROADCOM. However, Catalyst Pharmaceuticals is 15.9 times more volatile than BROADCOM P BROADCOM. It trades about 0.1 of its potential returns per unit of risk. BROADCOM P BROADCOM is currently generating about 0.02 per unit of risk. If you would invest  2,191  in Catalyst Pharmaceuticals on December 25, 2024 and sell it today you would earn a total of  383.00  from holding Catalyst Pharmaceuticals or generate 17.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Catalyst Pharmaceuticals  vs.  BROADCOM P BROADCOM

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.

BROADCOM P BROADCOM

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BROADCOM P BROADCOM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BROADCOM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Catalyst Pharmaceuticals and BROADCOM

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

The idea behind Catalyst Pharmaceuticals and BROADCOM P BROADCOM 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.