Correlation Between Catalent and Delek Logistics

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

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

Diversification Opportunities for Catalent and Delek Logistics

0.17

Correlation Coefficient

Catalent  Delek Logistics

Average diversification

The 3 months correlation between Catalent and Delek is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Delek Logistics Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Logistics Partners 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 Delek Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Logistics Partners has no effect on the direction of Catalent i.e., Catalent and Delek Logistics go up and down completely randomly.

Pair Corralation between Catalent and Delek Logistics

Given the investment horizon of 90 days Catalent is expected to generate 0.37 times more return on investment than Delek Logistics. However, Catalent is 2.7 times less risky than Delek Logistics. It trades about 0.14 of its potential returns per unit of risk. Delek Logistics Partners is currently generating about 0.0 per unit of risk. If you would invest  6,029  in Catalent on September 26, 2024 and sell it today you would earn a total of  319.00  from holding Catalent or generate 5.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Catalent  vs.  Delek Logistics Partners

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.

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Logistics is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Catalent and Delek Logistics

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

The idea behind Catalent and Delek Logistics Partners 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.