Correlation Between Catalyst Pharmaceuticals and Ameriprise Financial

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

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

Diversification Opportunities for Catalyst Pharmaceuticals and Ameriprise Financial

0.71

Correlation Coefficient

Catalyst Pharmaceuticals  Ameriprise Financial

Poor diversification

The 3 months correlation between Catalyst and Ameriprise is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Pharmaceuticals and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Catalyst Pharmaceuticals i.e., Catalyst Pharmaceuticals and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Catalyst Pharmaceuticals and Ameriprise Financial

Given the investment horizon of 90 days Catalyst Pharmaceuticals is expected to generate 3.91 times less return on investment than Ameriprise Financial. In addition to that, Catalyst Pharmaceuticals is 1.15 times more volatile than Ameriprise Financial. It trades about 0.05 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.21 per unit of volatility. If you would invest  44,384  in Ameriprise Financial on September 15, 2024 and sell it today you would earn a total of  10,592  from holding Ameriprise Financial or generate 23.86% return on investment over 90 days.

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

Catalyst Pharmaceuticals  vs.  Ameriprise Financial

Catalyst Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Catalyst Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ameriprise Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalyst Pharmaceuticals and Ameriprise Financial

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

The idea behind Catalyst Pharmaceuticals and Ameriprise Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.