Correlation Between Catalent and CITIC

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

By analyzing existing cross correlation between Catalent and CITIC Limited, you can compare the effects of market volatilities on Catalent and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and CITIC.

Diversification Opportunities for Catalent and CITIC

-0.22

Correlation Coefficient

Catalent  CITIC

Very good diversification

The 3 months correlation between Catalent and CITIC is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Catalent i.e., Catalent and CITIC go up and down completely randomly.

Pair Corralation between Catalent and CITIC

Given the investment horizon of 90 days Catalent is expected to generate 4.81 times less return on investment than CITIC. But when comparing it to its historical volatility, Catalent is 4.48 times less risky than CITIC. It trades about 0.11 of its potential returns per unit of risk. CITIC Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  92.00  in CITIC Limited on September 12, 2024 and sell it today you would earn a total of  18.00  from holding CITIC Limited or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Catalent  vs.  CITIC Limited

Catalent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 8 (%) 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.

CITIC Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and CITIC

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

The idea behind Catalent and CITIC Limited 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.