Correlation Between Catalent and Old Dominion

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

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

Diversification Opportunities for Catalent and Old Dominion

-0.63

Correlation Coefficient

Catalent  Old Dominion

Excellent diversification

The 3 months correlation between Catalent and Old is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Catalent i.e., Catalent and Old Dominion go up and down completely randomly.

Pair Corralation between Catalent and Old Dominion

Given the investment horizon of 90 days Catalent is expected to generate 1.45 times more return on investment than Old Dominion. However, Catalent is 1.45 times more volatile than Old Dominion Freight. It trades about 0.04 of its potential returns per unit of risk. Old Dominion Freight is currently generating about 0.04 per unit of risk. If you would invest  4,617  in Catalent on September 26, 2024 and sell it today you would earn a total of  1,731  from holding Catalent or generate 37.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Catalent  vs.  Old Dominion Freight

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.

Old Dominion Freight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Old Dominion 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 Old Dominion

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

The idea behind Catalent and Old Dominion Freight 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.