Correlation Between LB Investment and Pharmicell

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

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

Diversification Opportunities for LB Investment and Pharmicell

0.54

Correlation Coefficient

LB Investment  Pharmicell

Very weak diversification

The 3 months correlation between 309960 and Pharmicell is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and Pharmicell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmicell and LB Investment 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 LB Investment are associated (or correlated) with Pharmicell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmicell has no effect on the direction of LB Investment i.e., LB Investment and Pharmicell go up and down completely randomly.

Pair Corralation between LB Investment and Pharmicell

Assuming the 90 days trading horizon LB Investment is expected to generate 1.75 times less return on investment than Pharmicell. But when comparing it to its historical volatility, LB Investment is 1.07 times less risky than Pharmicell. It trades about 0.08 of its potential returns per unit of risk. Pharmicell is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  798,000  in Pharmicell on December 26, 2024 and sell it today you would earn a total of  310,000  from holding Pharmicell or generate 38.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

LB Investment  vs.  Pharmicell

LB Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LB Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LB Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pharmicell

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 10 (%) 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.

Pair Trading with LB Investment and Pharmicell

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

The idea behind LB Investment and Pharmicell 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 Transaction History module to view history of all your transactions and understand their impact on performance.