Correlation Between Terns Pharmaceuticals and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Terns Pharmaceuticals and Catalyst Pharmaceuticals

-0.51

Correlation Coefficient

Terns Pharmaceuticals  Catalyst Pharmaceuticals

Excellent diversification

The 3 months correlation between Terns and Catalyst is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Terns 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 Terns Pharmaceuticals 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 Terns Pharmaceuticals i.e., Terns Pharmaceuticals and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Terns Pharmaceuticals and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Terns Pharmaceuticals is expected to under-perform the Catalyst Pharmaceuticals. In addition to that, Terns Pharmaceuticals is 1.55 times more volatile than Catalyst Pharmaceuticals. It trades about -0.15 of its total potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.04 per unit of volatility. If you would invest  2,175  in Catalyst Pharmaceuticals on September 3, 2024 and sell it today you would earn a total of  32.00  from holding Catalyst Pharmaceuticals or generate 1.47% return on investment over 90 days.

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

Terns Pharmaceuticals  vs.  Catalyst Pharmaceuticals

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Terns Pharmaceuticals and Catalyst Pharmaceuticals

The main advantage of trading using opposite Terns Pharmaceuticals and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terns Pharmaceuticals 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 Terns Pharmaceuticals 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 Anywhere module to track or share privately all of your investments from the convenience of any device.