Correlation Between Catalent and AMCON Distributing

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

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

Diversification Opportunities for Catalent and AMCON Distributing

0.45

Correlation Coefficient

Catalent  AMCON Distributing

Very weak diversification

The 3 months correlation between Catalent and AMCON is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing 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 AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of Catalent i.e., Catalent and AMCON Distributing go up and down completely randomly.

Pair Corralation between Catalent and AMCON Distributing

Given the investment horizon of 90 days Catalent is expected to generate 0.17 times more return on investment than AMCON Distributing. However, Catalent is 5.99 times less risky than AMCON Distributing. It trades about 0.14 of its potential returns per unit of risk. AMCON Distributing is currently generating about 0.02 per unit of risk. If you would invest  6,014  in Catalent on September 24, 2024 and sell it today you would earn a total of  334.00  from holding Catalent or generate 5.55% return on investment over 90 days.

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

Catalent  vs.  AMCON Distributing

Catalent

Risk-Adjusted Performance

10 of 100

OK

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.

AMCON Distributing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AMCON Distributing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, AMCON Distributing is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Catalent and AMCON Distributing

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

The idea behind Catalent and AMCON Distributing 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.