Correlation Between Tandem Diabetes and Catalent

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

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

Diversification Opportunities for Tandem Diabetes and Catalent

0.12

Correlation Coefficient

Tandem Diabetes  Catalent

Average diversification

The 3 months correlation between Tandem and Catalent is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and Catalent go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Catalent

Given the investment horizon of 90 days Tandem Diabetes is expected to generate 2.74 times less return on investment than Catalent. In addition to that, Tandem Diabetes is 1.38 times more volatile than Catalent. It trades about 0.01 of its total potential returns per unit of risk. Catalent is currently generating about 0.04 per unit of volatility. If you would invest  4,545  in Catalent on September 23, 2024 and sell it today you would earn a total of  1,803  from holding Catalent or generate 39.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Tandem Diabetes Care  vs.  Catalent

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tandem Diabetes and Catalent

The main advantage of trading using opposite Tandem Diabetes and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.