Correlation Between Takeda Pharmaceutical and Catalent

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

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

Diversification Opportunities for Takeda Pharmaceutical and Catalent

-0.27

Correlation Coefficient

Takeda Pharmaceutical  Catalent

Very good diversification

The 3 months correlation between Takeda and Catalent is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and Takeda Pharmaceutical 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 Takeda Pharmaceutical 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 Takeda Pharmaceutical i.e., Takeda Pharmaceutical and Catalent go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and Catalent

Assuming the 90 days horizon Takeda Pharmaceutical is expected to under-perform the Catalent. In addition to that, Takeda Pharmaceutical is 1.18 times more volatile than Catalent. It trades about -0.01 of its total potential returns per unit of risk. Catalent is currently generating about 0.41 per unit of volatility. If you would invest  5,548  in Catalent on September 22, 2024 and sell it today you would earn a total of  445.00  from holding Catalent or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Takeda Pharmaceutical  vs.  Catalent

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Catalent

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Takeda Pharmaceutical and Catalent

The main advantage of trading using opposite Takeda Pharmaceutical and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Takeda Pharmaceutical 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 Takeda Pharmaceutical 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.