Correlation Between Catalent and WEC Energy

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

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

Diversification Opportunities for Catalent and WEC Energy

-0.2

Correlation Coefficient

Catalent  WEC Energy

Good diversification

The 3 months correlation between Catalent and WEC is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Catalent i.e., Catalent and WEC Energy go up and down completely randomly.

Pair Corralation between Catalent and WEC Energy

Given the investment horizon of 90 days Catalent is expected to generate 1.64 times less return on investment than WEC Energy. But when comparing it to its historical volatility, Catalent is 1.72 times less risky than WEC Energy. It trades about 0.17 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,794  in WEC Energy Group on September 22, 2024 and sell it today you would earn a total of  1,656  from holding WEC Energy Group or generate 21.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Catalent  vs.  WEC Energy Group

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.

WEC Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEC Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Catalent and WEC Energy

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

The idea behind Catalent and WEC Energy 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.