Correlation Between WEC Energy and Catalent

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

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

Diversification Opportunities for WEC Energy and Catalent

-0.2

Correlation Coefficient

WEC Energy  Catalent

Good diversification

The 3 months correlation between WEC and Catalent is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and WEC Energy 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 WEC Energy Group 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 WEC Energy i.e., WEC Energy and Catalent go up and down completely randomly.

Pair Corralation between WEC Energy and Catalent

Considering the 90-day investment horizon WEC Energy Group is expected to generate 1.72 times more return on investment than Catalent. However, WEC Energy is 1.72 times more volatile than Catalent. It trades about 0.16 of its potential returns per unit of risk. Catalent is currently generating about 0.17 per unit of risk. If you would invest  7,794  in WEC Energy Group on September 22, 2024 and sell it today you would earn a total of  1,656  from holding WEC Energy Group or generate 21.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

WEC Energy Group  vs.  Catalent

WEC Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEC Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 WEC Energy and Catalent

The main advantage of trading using opposite WEC Energy and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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 WEC Energy Group 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .