Correlation Between FSD Pharma and Catalent

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Can any of the company-specific risk be diversified away by investing in both FSD Pharma 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 FSD Pharma and Catalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FSD Pharma and Catalent, you can compare the effects of market volatilities on FSD Pharma 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 FSD Pharma with a short position of Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of FSD Pharma and Catalent.

Diversification Opportunities for FSD Pharma and Catalent

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between FSD Pharma and Catalent is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding FSD Pharma Inc and Catalent in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Catalent and FSD Pharma 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 FSD Pharma 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 FSD Pharma i.e., FSD Pharma and Catalent go up and down completely randomly.

Pair Corralation between FSD Pharma and Catalent

Given the investment horizon of 90 days FSD Pharma is expected to generate 1.7 times more return on investment than Catalent. However, FSD Pharma is 1.7 times more volatile than Catalent. It trades about 0.04 of its potential returns per unit of risk. Catalent is currently generating about -0.08 per unit of risk. If you would invest  85.00  in FSD Pharma on February 16, 2022 and sell it today you would earn a total of  3.00  from holding FSD Pharma or generate 3.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FSD Pharma Inc  vs.  Catalent

 Performance (%) 
      Timeline 
FSD Pharma 
FSD Pharma Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in FSD Pharma are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FSD Pharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

FSD Pharma Price Channel

Catalent 
Catalent Performance
0 of 100
Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Catalent Price Channel

FSD Pharma and Catalent Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with FSD Pharma and Catalent

The main advantage of trading using opposite FSD Pharma and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FSD Pharma 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 FSD Pharma 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.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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