Correlation Between Viatris and Catalent

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

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

Diversification Opportunities for Viatris and Catalent

0.54

Correlation Coefficient

Viatris  Catalent

Very weak diversification

The 3 months correlation between Viatris and Catalent is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Viatris and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and Viatris 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 Viatris 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 Viatris i.e., Viatris and Catalent go up and down completely randomly.

Pair Corralation between Viatris and Catalent

Given the investment horizon of 90 days Viatris is expected to under-perform the Catalent. In addition to that, Viatris is 2.56 times more volatile than Catalent. It trades about -0.16 of its total potential returns per unit of risk. Catalent is currently generating about 0.03 per unit of volatility. If you would invest  5,596  in Catalent on January 16, 2024 and sell it today you would earn a total of  12.00  from holding Catalent or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Viatris  vs.  Catalent

Viatris

Risk-Adjusted Performance

0 of 100

Very Weak

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

Catalent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Catalent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viatris and Catalent

The main advantage of trading using opposite Viatris and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viatris 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 Viatris 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 the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.