Correlation Between Vodka Brands and Catalent

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

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

Diversification Opportunities for Vodka Brands and Catalent

0.32

Correlation Coefficient

Vodka Brands  Catalent

Weak diversification

The 3 months correlation between Vodka and Catalent is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and Vodka Brands 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 Vodka Brands Corp are associated (or correlated) with Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Vodka Brands i.e., Vodka Brands and Catalent go up and down completely randomly.

Pair Corralation between Vodka Brands and Catalent

Given the investment horizon of 90 days Vodka Brands Corp is expected to under-perform the Catalent. In addition to that, Vodka Brands is 1.77 times more volatile than Catalent. It trades about -0.22 of its total potential returns per unit of risk. Catalent is currently generating about 0.36 per unit of volatility. If you would invest  6,129  in Catalent on September 25, 2024 and sell it today you would earn a total of  219.00  from holding Catalent or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Vodka Brands Corp  vs.  Catalent

Vodka Brands Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Vodka Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vodka Brands and Catalent

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

The idea behind Vodka Brands Corp and Catalent 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.