Correlation Between Catalent and Alimera Sciences

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

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

Diversification Opportunities for Catalent and Alimera Sciences

-0.19

Correlation Coefficient

Catalent  Alimera Sciences

Good diversification

The 3 months correlation between Catalent and Alimera is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Alimera Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimera Sciences and Catalent 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 Catalent are associated (or correlated) with Alimera Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimera Sciences has no effect on the direction of Catalent i.e., Catalent and Alimera Sciences go up and down completely randomly.

Pair Corralation between Catalent and Alimera Sciences

If you would invest  5,866  in Catalent on August 30, 2024 and sell it today you would earn a total of  209.00  from holding Catalent or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Catalent  vs.  Alimera Sciences

Catalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Alimera Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Alimera Sciences is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Catalent and Alimera Sciences

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

The idea behind Catalent and Alimera Sciences 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.