Correlation Between Pharmicell and Korea Line

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

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

Diversification Opportunities for Pharmicell and Korea Line

-0.41

Correlation Coefficient

Pharmicell  Korea Line

Very good diversification

The 3 months correlation between Pharmicell and Korea is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Pharmicell and Korea Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Line and Pharmicell 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 Pharmicell are associated (or correlated) with Korea Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Line has no effect on the direction of Pharmicell i.e., Pharmicell and Korea Line go up and down completely randomly.

Pair Corralation between Pharmicell and Korea Line

Assuming the 90 days trading horizon Pharmicell is expected to generate 1.99 times more return on investment than Korea Line. However, Pharmicell is 1.99 times more volatile than Korea Line. It trades about 0.72 of its potential returns per unit of risk. Korea Line is currently generating about 0.3 per unit of risk. If you would invest  531,000  in Pharmicell on October 9, 2024 and sell it today you would earn a total of  348,000  from holding Pharmicell or generate 65.54% return on investment over 90 days.

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

Pharmicell  vs.  Korea Line

Pharmicell

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pharmicell sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Line

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Line is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pharmicell and Korea Line

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

The idea behind Pharmicell and Korea Line 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.