Correlation Between Catalyst Pharmaceuticals and Asbury Automotive

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

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

Diversification Opportunities for Catalyst Pharmaceuticals and Asbury Automotive

-0.04

Correlation Coefficient

Catalyst Pharmaceuticals  Asbury Automotive

Good diversification

The 3 months correlation between Catalyst and Asbury is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Pharmaceuticals and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Catalyst Pharmaceuticals 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 Pharmaceuticals are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of Catalyst Pharmaceuticals i.e., Catalyst Pharmaceuticals and Asbury Automotive go up and down completely randomly.

Pair Corralation between Catalyst Pharmaceuticals and Asbury Automotive

Given the investment horizon of 90 days Catalyst Pharmaceuticals is expected to generate 1.2 times more return on investment than Asbury Automotive. However, Catalyst Pharmaceuticals is 1.2 times more volatile than Asbury Automotive Group. It trades about -0.08 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.14 per unit of risk. If you would invest  1,574  in Catalyst Pharmaceuticals on January 30, 2024 and sell it today you would lose (63.50) from holding Catalyst Pharmaceuticals or give up 4.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Catalyst Pharmaceuticals  vs.  Asbury Automotive Group

Catalyst Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Catalyst Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Asbury Automotive

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Asbury Automotive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Catalyst Pharmaceuticals and Asbury Automotive

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

The idea behind Catalyst Pharmaceuticals and Asbury Automotive Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.