Correlation Between National CineMedia and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for National CineMedia and Catalyst Pharmaceuticals

0.18

Correlation Coefficient

National CineMedia  Catalyst Pharmaceuticals

Average diversification

The 3 months correlation between National and Catalyst is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and National CineMedia 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 National CineMedia are associated (or correlated) with Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of National CineMedia i.e., National CineMedia and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between National CineMedia and Catalyst Pharmaceuticals

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Catalyst Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 1.41 times less risky than Catalyst Pharmaceuticals. The stock trades about -0.06 of its potential returns per unit of risk. The Catalyst Pharmaceuticals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,253  in Catalyst Pharmaceuticals on December 1, 2024 and sell it today you would lose (87.00) from holding Catalyst Pharmaceuticals or give up 3.86% of portfolio value over 90 days.

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

National CineMedia  vs.  Catalyst Pharmaceuticals

National CineMedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalyst Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Catalyst Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National CineMedia and Catalyst Pharmaceuticals

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

The idea behind National CineMedia and Catalyst Pharmaceuticals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .