Correlation Between Sam A and Daihan Pharmaceutical

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

By analyzing existing cross correlation between Sam A Pharm Co and Daihan Pharmaceutical CoLtd, you can compare the effects of market volatilities on Sam A and Daihan Pharmaceutical 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 Sam A with a short position of Daihan Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sam A and Daihan Pharmaceutical.

Diversification Opportunities for Sam A and Daihan Pharmaceutical

-0.63

Correlation Coefficient

Sam A  Daihan Pharmaceutical

Excellent diversification

The 3 months correlation between Sam and Daihan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sam A Pharm Co and Daihan Pharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daihan Pharmaceutical and Sam A 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 Sam A Pharm Co are associated (or correlated) with Daihan Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daihan Pharmaceutical has no effect on the direction of Sam A i.e., Sam A and Daihan Pharmaceutical go up and down completely randomly.

Pair Corralation between Sam A and Daihan Pharmaceutical

Assuming the 90 days trading horizon Sam A Pharm Co is expected to generate 1.41 times more return on investment than Daihan Pharmaceutical. However, Sam A is 1.41 times more volatile than Daihan Pharmaceutical CoLtd. It trades about 0.4 of its potential returns per unit of risk. Daihan Pharmaceutical CoLtd is currently generating about 0.08 per unit of risk. If you would invest  1,587,826  in Sam A Pharm Co on October 11, 2024 and sell it today you would earn a total of  173,174  from holding Sam A Pharm Co or generate 10.91% return on investment over 90 days.

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

Sam A Pharm Co  vs.  Daihan Pharmaceutical CoLtd

Sam A Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sam A Pharm Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daihan Pharmaceutical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daihan Pharmaceutical CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daihan Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sam A and Daihan Pharmaceutical

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

The idea behind Sam A Pharm Co and Daihan Pharmaceutical CoLtd 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.