Correlation Between Royalty Management and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Royalty Management and Catalyst Pharmaceuticals

0.14

Correlation Coefficient

Royalty Management  Catalyst Pharmaceuticals

Average diversification

The 3 months correlation between Royalty and Catalyst is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Royalty Management 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 Royalty Management Holding 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 Royalty Management i.e., Royalty Management and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Royalty Management and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Royalty Management Holding is expected to generate 1.49 times more return on investment than Catalyst Pharmaceuticals. However, Royalty Management is 1.49 times more volatile than Catalyst Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.06 per unit of risk. If you would invest  99.00  in Royalty Management Holding on October 20, 2024 and sell it today you would earn a total of  9.00  from holding Royalty Management Holding or generate 9.09% return on investment over 90 days.

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

Royalty Management Holding  vs.  Catalyst Pharmaceuticals

Royalty Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Royalty Management and Catalyst Pharmaceuticals

The main advantage of trading using opposite Royalty Management and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royalty Management 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 Royalty Management Holding 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.