Correlation Between DATAGROUP and Catalent

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

By analyzing existing cross correlation between DATAGROUP SE and Catalent, you can compare the effects of market volatilities on DATAGROUP and Catalent 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 DATAGROUP with a short position of Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATAGROUP and Catalent.

Diversification Opportunities for DATAGROUP and Catalent

0.74

Correlation Coefficient

DATAGROUP  Catalent

Poor diversification

The 3 months correlation between DATAGROUP and Catalent is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and DATAGROUP 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 DATAGROUP SE are associated (or correlated) with Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of DATAGROUP i.e., DATAGROUP and Catalent go up and down completely randomly.

Pair Corralation between DATAGROUP and Catalent

Assuming the 90 days trading horizon DATAGROUP SE is expected to under-perform the Catalent. But the stock apears to be less risky and, when comparing its historical volatility, DATAGROUP SE is 1.57 times less risky than Catalent. The stock trades about -0.02 of its potential returns per unit of risk. The Catalent is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,502  in Catalent on October 4, 2024 and sell it today you would earn a total of  1,491  from holding Catalent or generate 33.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.0%
Values	Daily Returns

DATAGROUP SE  vs.  Catalent

DATAGROUP SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Catalent

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DATAGROUP and Catalent

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

The idea behind DATAGROUP SE and Catalent 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.