Correlation Between Pharmicell and Aprogen KIC

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

By analyzing existing cross correlation between Pharmicell and Aprogen KIC, you can compare the effects of market volatilities on Pharmicell and Aprogen KIC 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 Aprogen KIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharmicell and Aprogen KIC.

Diversification Opportunities for Pharmicell and Aprogen KIC

-0.47

Correlation Coefficient

Pharmicell  Aprogen KIC

Very good diversification

The 3 months correlation between Pharmicell and Aprogen is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Pharmicell and Aprogen KIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aprogen KIC 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 Aprogen KIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aprogen KIC has no effect on the direction of Pharmicell i.e., Pharmicell and Aprogen KIC go up and down completely randomly.

Pair Corralation between Pharmicell and Aprogen KIC

Assuming the 90 days trading horizon Pharmicell is expected to generate 1.87 times more return on investment than Aprogen KIC. However, Pharmicell is 1.87 times more volatile than Aprogen KIC. It trades about 0.15 of its potential returns per unit of risk. Aprogen KIC is currently generating about -0.01 per unit of risk. If you would invest  798,000  in Pharmicell on December 26, 2024 and sell it today you would earn a total of  342,000  from holding Pharmicell or generate 42.86% 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.  Aprogen KIC

Pharmicell

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 11 (%) 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.

Aprogen KIC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aprogen KIC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aprogen KIC 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 Aprogen KIC

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

The idea behind Pharmicell and Aprogen KIC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.