Correlation Between Pharmicell and Dongbang Ship

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

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

Diversification Opportunities for Pharmicell and Dongbang Ship

0.69

Correlation Coefficient

Pharmicell  Dongbang Ship

Poor diversification

The 3 months correlation between Pharmicell and Dongbang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pharmicell and Dongbang Ship Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Ship Machinery 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 Dongbang Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Ship Machinery has no effect on the direction of Pharmicell i.e., Pharmicell and Dongbang Ship go up and down completely randomly.

Pair Corralation between Pharmicell and Dongbang Ship

Assuming the 90 days trading horizon Pharmicell is expected to generate 1.18 times more return on investment than Dongbang Ship. However, Pharmicell is 1.18 times more volatile than Dongbang Ship Machinery. It trades about 0.27 of its potential returns per unit of risk. Dongbang Ship Machinery is currently generating about 0.05 per unit of risk. If you would invest  498,000  in Pharmicell on October 26, 2024 and sell it today you would earn a total of  410,000  from holding Pharmicell or generate 82.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Pharmicell  vs.  Dongbang Ship Machinery

Pharmicell

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 21 (%) 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.

Dongbang Ship Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongbang Ship may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pharmicell and Dongbang Ship

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

The idea behind Pharmicell and Dongbang Ship Machinery 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.