Correlation Between Fidus Investment and Catalyst Pharmaceuticals

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

By analyzing existing cross correlation between Fidus Investment Corp and Catalyst Pharmaceuticals, you can compare the effects of market volatilities on Fidus Investment and Catalyst Pharmaceuticals 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 Fidus Investment with a short position of Catalyst Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidus Investment and Catalyst Pharmaceuticals.

Diversification Opportunities for Fidus Investment and Catalyst Pharmaceuticals

0.43

Correlation Coefficient

Fidus Investment  Catalyst Pharmaceuticals

Very weak diversification

The 3 months correlation between Fidus and Catalyst is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Fidus Investment 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 Fidus Investment Corp are associated (or correlated) with Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Fidus Investment i.e., Fidus Investment and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Fidus Investment and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Fidus Investment Corp is expected to generate 0.35 times more return on investment than Catalyst Pharmaceuticals. However, Fidus Investment Corp is 2.84 times less risky than Catalyst Pharmaceuticals. It trades about 0.18 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.05 per unit of risk. If you would invest  1,976  in Fidus Investment Corp on September 15, 2024 and sell it today you would earn a total of  162.00  from holding Fidus Investment Corp or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fidus Investment Corp  vs.  Catalyst Pharmaceuticals

Fidus Investment Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Catalyst Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidus Investment and Catalyst Pharmaceuticals

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

The idea behind Fidus Investment Corp and Catalyst Pharmaceuticals 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.