Correlation Between Catalent and Willamette Valley

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

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

Diversification Opportunities for Catalent and Willamette Valley

-0.23

Correlation Coefficient

Catalent  Willamette Valley

Very good diversification

The 3 months correlation between Catalent and Willamette is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Catalent i.e., Catalent and Willamette Valley go up and down completely randomly.

Pair Corralation between Catalent and Willamette Valley

Given the investment horizon of 90 days Catalent is expected to generate 1.62 times more return on investment than Willamette Valley. However, Catalent is 1.62 times more volatile than Willamette Valley Vineyards. It trades about 0.04 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.05 per unit of risk. If you would invest  4,545  in Catalent on September 23, 2024 and sell it today you would earn a total of  1,803  from holding Catalent or generate 39.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Catalent  vs.  Willamette Valley Vineyards

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.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Willamette Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Catalent and Willamette Valley

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

The idea behind Catalent and Willamette Valley Vineyards 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.