Correlation Between Catalent and LENSAR

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

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

Diversification Opportunities for Catalent and LENSAR

0.29

Correlation Coefficient

Catalent  LENSAR

Modest diversification

The 3 months correlation between Catalent and LENSAR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR 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 LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of Catalent i.e., Catalent and LENSAR go up and down completely randomly.

Pair Corralation between Catalent and LENSAR

Given the investment horizon of 90 days Catalent is expected to generate 10.7 times less return on investment than LENSAR. But when comparing it to its historical volatility, Catalent is 7.11 times less risky than LENSAR. It trades about 0.14 of its potential returns per unit of risk. LENSAR Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  442.00  in LENSAR Inc on September 24, 2024 and sell it today you would earn a total of  328.00  from holding LENSAR Inc or generate 74.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Catalent  vs.  LENSAR Inc

Catalent

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 11 (%) 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.

LENSAR Inc

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Catalent and LENSAR

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

The idea behind Catalent and LENSAR 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.