Correlation Between Catalystmillburn and Catalyst/smh High

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

By analyzing existing cross correlation between Catalystmillburn Hedge Strategy and Catalystsmh High Income, you can compare the effects of market volatilities on Catalystmillburn and Catalyst/smh High 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 Catalystmillburn with a short position of Catalyst/smh High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalystmillburn and Catalyst/smh High.

Diversification Opportunities for Catalystmillburn and Catalyst/smh High

0.89

Correlation Coefficient

Catalystmillburn  Catalyst/smh High

Very poor diversification

The 3 months correlation between Catalystmillburn and Catalyst/smh is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Catalystmillburn Hedge Strateg and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income and Catalystmillburn 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 Catalystmillburn Hedge Strategy are associated (or correlated) with Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of Catalystmillburn i.e., Catalystmillburn and Catalyst/smh High go up and down completely randomly.

Pair Corralation between Catalystmillburn and Catalyst/smh High

Assuming the 90 days horizon Catalystmillburn Hedge Strategy is expected to generate 1.84 times more return on investment than Catalyst/smh High. However, Catalystmillburn is 1.84 times more volatile than Catalystsmh High Income. It trades about 0.25 of its potential returns per unit of risk. Catalystsmh High Income is currently generating about 0.23 per unit of risk. If you would invest  3,748  in Catalystmillburn Hedge Strategy on September 10, 2024 and sell it today you would earn a total of  272.00  from holding Catalystmillburn Hedge Strategy or generate 7.26% return on investment over 90 days.

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

Catalystmillburn Hedge Strateg  vs.  Catalystsmh High Income

Catalystmillburn Hedge

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Catalystmillburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Catalystsmh High Income

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystsmh High Income are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Catalyst/smh High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Catalystmillburn and Catalyst/smh High

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

The idea behind Catalystmillburn Hedge Strategy and Catalystsmh High Income 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.