Can any of the company-specific risk be diversified away by investing in both X4 Pharmaceuticals 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 X4 Pharmaceuticals and Catalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X4 Pharmaceuticals and Catalent, you can compare the effects of market volatilities on X4 Pharmaceuticals 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 X4 Pharmaceuticals with a short position of Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of X4 Pharmaceuticals and Catalent.
Diversification Opportunities for X4 Pharmaceuticals and Catalent
The 3 months correlation between XFOR and Catalent is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding X4 Pharmaceuticals and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and X4 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 X4 Pharmaceuticals 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 X4 Pharmaceuticals i.e., X4 Pharmaceuticals and Catalent go up and down completely randomly.
Pair Corralation between X4 Pharmaceuticals and Catalent
Given the investment horizon of 90 days X4 Pharmaceuticals is expected to generate 12.35 times more return on investment than Catalent. However, X4 Pharmaceuticals is 12.35 times more volatile than Catalent. It trades about 0.04 of its potential returns per unit of risk. Catalent is currently generating about -0.13 per unit of risk. If you would invest 96.00 in X4 Pharmaceuticals on March 6, 2024 and sell it today you would earn a total of 4.00 from holding X4 Pharmaceuticals or generate 4.17% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in X4 Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, X4 Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.
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.