Correlation Between Raontech and Pharmicell

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

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

Diversification Opportunities for Raontech and Pharmicell

0.4

Correlation Coefficient

Raontech  Pharmicell

Very weak diversification

The 3 months correlation between Raontech and Pharmicell is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Raontech and Pharmicell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmicell and Raontech 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 Raontech 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 Raontech i.e., Raontech and Pharmicell go up and down completely randomly.

Pair Corralation between Raontech and Pharmicell

Assuming the 90 days trading horizon Raontech is expected to generate 2.52 times less return on investment than Pharmicell. But when comparing it to its historical volatility, Raontech is 1.06 times less risky than Pharmicell. It trades about 0.15 of its potential returns per unit of risk. Pharmicell is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  509,000  in Pharmicell on October 11, 2024 and sell it today you would earn a total of  436,000  from holding Pharmicell or generate 85.66% return on investment over 90 days.

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

Raontech  vs.  Pharmicell

Raontech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raontech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Raontech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pharmicell

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 19 (%) 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 Raontech and Pharmicell

The main advantage of trading using opposite Raontech and Pharmicell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raontech 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 Raontech 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.