Correlation Between Catalyst Insider and Managed Volatility

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

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

Diversification Opportunities for Catalyst Insider and Managed Volatility

0.96

Correlation Coefficient

Catalyst Insider  Managed Volatility

Almost no diversification

The 3 months correlation between Catalyst and Managed is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Insider Income and Managed Volatility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Volatility and Catalyst Insider 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 Catalyst Insider Income are associated (or correlated) with Managed Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Volatility has no effect on the direction of Catalyst Insider i.e., Catalyst Insider and Managed Volatility go up and down completely randomly.

Pair Corralation between Catalyst Insider and Managed Volatility

Assuming the 90 days horizon Catalyst Insider Income is expected to generate 4.46 times more return on investment than Managed Volatility. However, Catalyst Insider is 4.46 times more volatile than Managed Volatility Fund. It trades about 0.25 of its potential returns per unit of risk. Managed Volatility Fund is currently generating about 0.34 per unit of risk. If you would invest  906.00  in Catalyst Insider Income on September 26, 2024 and sell it today you would earn a total of  18.00  from holding Catalyst Insider Income or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	90.48%
Values	Daily Returns

Catalyst Insider Income  vs.  Managed Volatility Fund

Catalyst Insider Income

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Insider Income are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Catalyst Insider is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Managed Volatility

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Managed Volatility Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Managed Volatility is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Catalyst Insider and Managed Volatility

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

The idea behind Catalyst Insider Income and Managed Volatility Fund 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.