Correlation Between Arcus Biosciences and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Arcus Biosciences and Catalyst Pharmaceuticals

0.09

Correlation Coefficient

Arcus Biosciences  Catalyst Pharmaceuticals

Significant diversification

The 3 months correlation between Arcus and Catalyst is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Arcus Biosciences 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 Arcus Biosciences 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 Arcus Biosciences i.e., Arcus Biosciences and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Arcus Biosciences is expected to generate 1.77 times more return on investment than Catalyst Pharmaceuticals. However, Arcus Biosciences is 1.77 times more volatile than Catalyst Pharmaceuticals. It trades about 0.14 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.06 per unit of risk. If you would invest  1,456  in Arcus Biosciences on September 25, 2024 and sell it today you would earn a total of  139.00  from holding Arcus Biosciences or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Arcus Biosciences  vs.  Catalyst Pharmaceuticals

Arcus Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arcus Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arcus Biosciences is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Catalyst Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arcus Biosciences and Catalyst Pharmaceuticals

The main advantage of trading using opposite Arcus Biosciences and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcus Biosciences 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 Arcus Biosciences 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.