Correlation Between NTT DATA and Catalent

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

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

Diversification Opportunities for NTT DATA and Catalent

0.73

Correlation Coefficient

NTT DATA  Catalent

Poor diversification

The 3 months correlation between NTT and Catalent is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NTT DATA and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and NTT DATA 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 NTT DATA 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 NTT DATA i.e., NTT DATA and Catalent go up and down completely randomly.

Pair Corralation between NTT DATA and Catalent

Assuming the 90 days trading horizon NTT DATA is expected to generate 1.43 times less return on investment than Catalent. But when comparing it to its historical volatility, NTT DATA is 1.63 times less risky than Catalent. It trades about 0.04 of its potential returns per unit of risk. 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

NTT DATA   vs.  Catalent

NTT DATA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NTT DATA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NTT DATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 NTT DATA and Catalent

The main advantage of trading using opposite NTT DATA and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NTT DATA 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 NTT DATA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.