Correlation Between TaiMed Biologics and PharmaEngine

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

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

Diversification Opportunities for TaiMed Biologics and PharmaEngine

0.75

Correlation Coefficient

TaiMed Biologics  PharmaEngine

Poor diversification

The 3 months correlation between TaiMed and PharmaEngine is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TaiMed Biologics and PharmaEngine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaEngine and TaiMed Biologics 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 TaiMed Biologics are associated (or correlated) with PharmaEngine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmaEngine has no effect on the direction of TaiMed Biologics i.e., TaiMed Biologics and PharmaEngine go up and down completely randomly.

Pair Corralation between TaiMed Biologics and PharmaEngine

Assuming the 90 days trading horizon TaiMed Biologics is expected to generate 1.1 times less return on investment than PharmaEngine. But when comparing it to its historical volatility, TaiMed Biologics is 1.12 times less risky than PharmaEngine. It trades about 0.07 of its potential returns per unit of risk. PharmaEngine is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,100  in PharmaEngine on December 30, 2024 and sell it today you would earn a total of  950.00  from holding PharmaEngine or generate 10.44% return on investment over 90 days.

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

TaiMed Biologics  vs.  PharmaEngine

TaiMed Biologics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TaiMed Biologics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TaiMed Biologics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PharmaEngine

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PharmaEngine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PharmaEngine showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TaiMed Biologics and PharmaEngine

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

The idea behind TaiMed Biologics and PharmaEngine 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..