Correlation Between Catalent and Cronos

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

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

Diversification Opportunities for Catalent and Cronos

-0.5

Correlation Coefficient

Catalent  Cronos

Very good diversification

The 3 months correlation between Catalent and Cronos is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos Group has no effect on the direction of Catalent i.e., Catalent and Cronos go up and down completely randomly.

Pair Corralation between Catalent and Cronos

Given the investment horizon of 90 days Catalent is expected to generate 0.22 times more return on investment than Cronos. However, Catalent is 4.63 times less risky than Cronos. It trades about 0.18 of its potential returns per unit of risk. Cronos Group is currently generating about -0.05 per unit of risk. If you would invest  6,018  in Catalent on September 19, 2024 and sell it today you would earn a total of  330.00  from holding Catalent or generate 5.48% return on investment over 90 days.

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

Catalent  vs.  Cronos Group

Catalent

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 10 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cronos Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cronos Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Catalent and Cronos

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

The idea behind Catalent and Cronos Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.