Correlation Between Armada Hflr and PharmChem

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

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

Diversification Opportunities for Armada Hflr and PharmChem

0.31

Correlation Coefficient

Armada Hflr  PharmChem

Weak diversification

The 3 months correlation between Armada and PharmChem is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and PharmChem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmChem and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with PharmChem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmChem has no effect on the direction of Armada Hflr i.e., Armada Hflr and PharmChem go up and down completely randomly.

Pair Corralation between Armada Hflr and PharmChem

Considering the 90-day investment horizon Armada Hflr is expected to generate 4.83 times less return on investment than PharmChem. But when comparing it to its historical volatility, Armada Hflr Pr is 3.98 times less risky than PharmChem. It trades about 0.03 of its potential returns per unit of risk. PharmChem is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  271.00  in PharmChem on September 18, 2024 and sell it today you would earn a total of  34.00  from holding PharmChem or generate 12.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Armada Hflr Pr  vs.  PharmChem

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

PharmChem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PharmChem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Armada Hflr and PharmChem

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

The idea behind Armada Hflr Pr and PharmChem 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.