Correlation Between Rational Special and Catalyst Insider

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

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

Diversification Opportunities for Rational Special and Catalyst Insider

0.9

Correlation Coefficient

Rational Special  Catalyst Insider

Almost no diversification

The 3 months correlation between Rational and Catalyst is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rational Special Situations and Catalyst Insider Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Insider Income and Rational Special 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 Rational Special Situations are associated (or correlated) with Catalyst Insider. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Insider Income has no effect on the direction of Rational Special i.e., Rational Special and Catalyst Insider go up and down completely randomly.

Pair Corralation between Rational Special and Catalyst Insider

Assuming the 90 days horizon Rational Special Situations is expected to under-perform the Catalyst Insider. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rational Special Situations is 2.56 times less risky than Catalyst Insider. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Catalyst Insider Income is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  920.00  in Catalyst Insider Income on September 28, 2024 and sell it today you would earn a total of  3.00  from holding Catalyst Insider Income or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Rational Special Situations  vs.  Catalyst Insider Income

Rational Special Sit

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Special Situations are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rational Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Catalyst Insider Income

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Insider Income are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Catalyst Insider is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Special and Catalyst Insider

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

The idea behind Rational Special Situations and Catalyst Insider Income 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.