Correlation Between Catalent and Compania Cervecerias

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

By analyzing existing cross correlation between Catalent and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Catalent and Compania Cervecerias 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 Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and Compania Cervecerias.

Diversification Opportunities for Catalent and Compania Cervecerias

0.52

Correlation Coefficient

Catalent  Compania Cervecerias

Very weak diversification

The 3 months correlation between Catalent and Compania is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias 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 Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Catalent i.e., Catalent and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Catalent and Compania Cervecerias

Given the investment horizon of 90 days Catalent is expected to generate 1.76 times more return on investment than Compania Cervecerias. However, Catalent is 1.76 times more volatile than Compania Cervecerias Unidas. It trades about 0.04 of its potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.0 per unit of risk. If you would invest  4,545  in Catalent on September 23, 2024 and sell it today you would earn a total of  1,803  from holding Catalent or generate 39.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

Catalent  vs.  Compania Cervecerias Unidas

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Compania Cervecerias

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Compania Cervecerias may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Catalent and Compania Cervecerias

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

The idea behind Catalent and Compania Cervecerias Unidas 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.