Correlation Between Catalent and Neurocrine Biosciences

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

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

Diversification Opportunities for Catalent and Neurocrine Biosciences

-0.04

Correlation Coefficient

Catalent  Neurocrine Biosciences

Good diversification

The 3 months correlation between Catalent and Neurocrine is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Neurocrine Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neurocrine Biosciences 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 Neurocrine Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neurocrine Biosciences has no effect on the direction of Catalent i.e., Catalent and Neurocrine Biosciences go up and down completely randomly.

Pair Corralation between Catalent and Neurocrine Biosciences

Given the investment horizon of 90 days Catalent is expected to generate 2.76 times less return on investment than Neurocrine Biosciences. But when comparing it to its historical volatility, Catalent is 2.74 times less risky than Neurocrine Biosciences. It trades about 0.02 of its potential returns per unit of risk. Neurocrine Biosciences is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12,510  in Neurocrine Biosciences on September 2, 2024 and sell it today you would earn a total of  165.00  from holding Neurocrine Biosciences or generate 1.32% return on investment over 90 days.

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

Catalent  vs.  Neurocrine Biosciences

Catalent

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 1 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Neurocrine Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neurocrine Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Neurocrine Biosciences is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Catalent and Neurocrine Biosciences

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

The idea behind Catalent and Neurocrine Biosciences 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.