Correlation Between Catalent and ODDITY Tech

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

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

Diversification Opportunities for Catalent and ODDITY Tech

0.49

Correlation Coefficient

Catalent  ODDITY Tech

Very weak diversification

The 3 months correlation between Catalent and ODDITY is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech 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 ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of Catalent i.e., Catalent and ODDITY Tech go up and down completely randomly.

Pair Corralation between Catalent and ODDITY Tech

Given the investment horizon of 90 days Catalent is expected to generate 0.18 times more return on investment than ODDITY Tech. However, Catalent is 5.46 times less risky than ODDITY Tech. It trades about 0.36 of its potential returns per unit of risk. ODDITY Tech Ltd is currently generating about -0.11 per unit of risk. If you would invest  6,129  in Catalent on September 24, 2024 and sell it today you would earn a total of  219.00  from holding Catalent or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Catalent  vs.  ODDITY Tech Ltd

Catalent

Risk-Adjusted Performance

10 of 100

Good

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

ODDITY Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ODDITY Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and ODDITY Tech

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

The idea behind Catalent and ODDITY Tech Ltd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.