Correlation Between Catalent and Eyepoint Pharmaceuticals

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

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

Diversification Opportunities for Catalent and Eyepoint Pharmaceuticals

-0.54

Correlation Coefficient

Catalent  Eyepoint Pharmaceuticals

Excellent diversification

The 3 months correlation between Catalent and Eyepoint is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Eyepoint Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyepoint Pharmaceuticals 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 Eyepoint Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyepoint Pharmaceuticals has no effect on the direction of Catalent i.e., Catalent and Eyepoint Pharmaceuticals go up and down completely randomly.

Pair Corralation between Catalent and Eyepoint Pharmaceuticals

Given the investment horizon of 90 days Catalent is expected to generate 0.15 times more return on investment than Eyepoint Pharmaceuticals. However, Catalent is 6.88 times less risky than Eyepoint Pharmaceuticals. It trades about 0.4 of its potential returns per unit of risk. Eyepoint Pharmaceuticals is currently generating about -0.32 per unit of risk. If you would invest  5,946  in Catalent on September 12, 2024 and sell it today you would earn a total of  378.00  from holding Catalent or generate 6.36% 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.  Eyepoint Pharmaceuticals

Catalent

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 11 (%) 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.

Eyepoint Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Catalent and Eyepoint Pharmaceuticals

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

The idea behind Catalent and Eyepoint Pharmaceuticals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.