Correlation Between Catalyst Insider and Royce Opportunity

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

By analyzing existing cross correlation between Catalyst Insider Buying and Royce Opportunity Fund, you can compare the effects of market volatilities on Catalyst Insider and Royce Opportunity 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 Royce Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst Insider and Royce Opportunity.

Diversification Opportunities for Catalyst Insider and Royce Opportunity

0.85

Correlation Coefficient

Catalyst Insider  Royce Opportunity

Very poor diversification

The 3 months correlation between Catalyst and Royce is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Insider Buying and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity 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 Buying are associated (or correlated) with Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of Catalyst Insider i.e., Catalyst Insider and Royce Opportunity go up and down completely randomly.

Pair Corralation between Catalyst Insider and Royce Opportunity

Assuming the 90 days horizon Catalyst Insider Buying is expected to under-perform the Royce Opportunity. In addition to that, Catalyst Insider is 1.19 times more volatile than Royce Opportunity Fund. It trades about -0.03 of its total potential returns per unit of risk. Royce Opportunity Fund is currently generating about 0.25 per unit of volatility. If you would invest  1,528  in Royce Opportunity Fund on September 14, 2024 and sell it today you would earn a total of  77.00  from holding Royce Opportunity Fund or generate 5.04% return on investment over 90 days.

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

Catalyst Insider Buying  vs.  Royce Opportunity Fund

Catalyst Insider Buying

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Insider Buying are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Catalyst Insider is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Royce Opportunity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Royce Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalyst Insider and Royce Opportunity

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

The idea behind Catalyst Insider Buying and Royce Opportunity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.