Correlation Between NYSE Declining and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for NYSE Declining and Catalyst Pharmaceuticals

0.05

Correlation Coefficient

NYSE Declining  Catalyst Pharmaceuticals

Significant diversification

The 3 months correlation between NYSE and Catalyst is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Declining Stocks and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and NYSE Declining 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 NYSE Declining Stocks 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 NYSE Declining i.e., NYSE Declining and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between NYSE Declining and Catalyst Pharmaceuticals

Assuming the 90 days trading horizon NYSE Declining Stocks is expected to generate 28.85 times more return on investment than Catalyst Pharmaceuticals. However, NYSE Declining is 28.85 times more volatile than Catalyst Pharmaceuticals. It trades about 0.24 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.02 per unit of risk. If you would invest  59,400  in NYSE Declining Stocks on September 19, 2024 and sell it today you would earn a total of  108,100  from holding NYSE Declining Stocks or generate 181.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

NYSE Declining Stocks  vs.  Catalyst Pharmaceuticals

Pair Trading with NYSE Declining and Catalyst Pharmaceuticals

The main advantage of trading using opposite NYSE Declining and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Declining 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 NYSE Declining Stocks 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.