Correlation Between PHLX Oil and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for PHLX Oil and Catalyst Pharmaceuticals

-0.31

Correlation Coefficient

PHLX Oil  Catalyst Pharmaceuticals

Very good diversification

The 3 months correlation between PHLX and Catalyst is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding PHLX Oil Service and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and PHLX Oil 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 PHLX Oil Service are associated (or correlated) with Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of PHLX Oil i.e., PHLX Oil and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between PHLX Oil and Catalyst Pharmaceuticals

Assuming the 90 days trading horizon PHLX Oil Service is expected to generate 1.04 times more return on investment than Catalyst Pharmaceuticals. However, PHLX Oil is 1.04 times more volatile than Catalyst Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about -0.09 per unit of risk. If you would invest  5,609  in PHLX Oil Service on April 26, 2025 and sell it today you would earn a total of  731.00  from holding PHLX Oil Service or generate 13.03% return on investment over 90 days.

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

PHLX Oil Service  vs.  Catalyst Pharmaceuticals

Pair Trading with PHLX Oil and Catalyst Pharmaceuticals

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

The idea behind PHLX Oil Service and Catalyst Pharmaceuticals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.