Correlation Between Mind Medicine and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Mind Medicine and Catalyst Pharmaceuticals

0.76

Correlation Coefficient

Mind Medicine  Catalyst Pharmaceuticals

Poor diversification

The 3 months correlation between Mind and Catalyst is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Mind Medicine and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Mind Medicine 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 Mind Medicine 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 Mind Medicine i.e., Mind Medicine and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Mind Medicine and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Mind Medicine is expected to generate 2.49 times more return on investment than Catalyst Pharmaceuticals. However, Mind Medicine is 2.49 times more volatile than Catalyst Pharmaceuticals. It trades about 0.14 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.11 per unit of risk. If you would invest  580.00  in Mind Medicine on August 31, 2024 and sell it today you would earn a total of  246.00  from holding Mind Medicine or generate 42.41% return on investment over 90 days.

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

Mind Medicine  vs.  Catalyst Pharmaceuticals

Mind Medicine

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mind Medicine are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Mind Medicine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Mind Medicine and Catalyst Pharmaceuticals

The main advantage of trading using opposite Mind Medicine and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mind Medicine 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 Mind Medicine 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.