Correlation Between Herc Holdings and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Herc Holdings and Catalyst Pharmaceuticals

0.81

Correlation Coefficient

Herc Holdings  Catalyst Pharmaceuticals

Very poor diversification

The 3 months correlation between Herc and Catalyst is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Herc Holdings 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 Herc Holdings 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 Herc Holdings i.e., Herc Holdings and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Herc Holdings and Catalyst Pharmaceuticals

Considering the 90-day investment horizon Herc Holdings is expected to under-perform the Catalyst Pharmaceuticals. In addition to that, Herc Holdings is 1.22 times more volatile than Catalyst Pharmaceuticals. It trades about -0.38 of its total potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.01 per unit of volatility. If you would invest  2,193  in Catalyst Pharmaceuticals on September 27, 2024 and sell it today you would lose (2.00) from holding Catalyst Pharmaceuticals or give up 0.09% of portfolio value over 90 days.

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

Herc Holdings  vs.  Catalyst Pharmaceuticals

Herc Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Herc Holdings and Catalyst Pharmaceuticals

The main advantage of trading using opposite Herc Holdings and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings 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 Herc Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .