Correlation Between Catalent and Zoetis

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

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

Diversification Opportunities for Catalent and Zoetis

-0.31

Correlation Coefficient

Catalent  Zoetis

Very good diversification

The 3 months correlation between Catalent and Zoetis is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Zoetis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoetis Inc and Catalent 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 Catalent are associated (or correlated) with Zoetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoetis Inc has no effect on the direction of Catalent i.e., Catalent and Zoetis go up and down completely randomly.

Pair Corralation between Catalent and Zoetis

Assuming the 90 days horizon Catalent is expected to generate 0.66 times more return on investment than Zoetis. However, Catalent is 1.51 times less risky than Zoetis. It trades about 0.22 of its potential returns per unit of risk. Zoetis Inc is currently generating about -0.15 per unit of risk. If you would invest  5,497  in Catalent on September 23, 2024 and sell it today you would earn a total of  496.00  from holding Catalent or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Catalent  vs.  Zoetis Inc

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.

Zoetis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Catalent and Zoetis

The main advantage of trading using opposite Catalent and Zoetis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent position performs unexpectedly, Zoetis 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 Zoetis will offset losses from the drop in Zoetis' long position.

The idea behind Catalent and Zoetis Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.