Correlation Between Catalent and Dana

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

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

Diversification Opportunities for Catalent and Dana

0.85

Correlation Coefficient

Catalent  Dana

Very poor diversification

The 3 months correlation between Catalent and Dana is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Catalent i.e., Catalent and Dana go up and down completely randomly.

Pair Corralation between Catalent and Dana

Given the investment horizon of 90 days Catalent is expected to generate 2.7 times less return on investment than Dana. But when comparing it to its historical volatility, Catalent is 6.39 times less risky than Dana. It trades about 0.14 of its potential returns per unit of risk. Dana Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,038  in Dana Inc on September 24, 2024 and sell it today you would earn a total of  111.00  from holding Dana Inc or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.38%
Values	Daily Returns

Catalent  vs.  Dana Inc

Catalent

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 10 (%) 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.

Dana Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and Dana

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

The idea behind Catalent and Dana 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.