Correlation Between Alkermes Plc and Phibro Animal

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

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

Diversification Opportunities for Alkermes Plc and Phibro Animal

0.33

Correlation Coefficient

Alkermes Plc  Phibro Animal

Weak diversification

The 3 months correlation between Alkermes and Phibro is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alkermes Plc and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health and Alkermes Plc 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 Alkermes Plc are associated (or correlated) with Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of Alkermes Plc i.e., Alkermes Plc and Phibro Animal go up and down completely randomly.

Pair Corralation between Alkermes Plc and Phibro Animal

Given the investment horizon of 90 days Alkermes Plc is expected to generate 3.44 times less return on investment than Phibro Animal. But when comparing it to its historical volatility, Alkermes Plc is 1.35 times less risky than Phibro Animal. It trades about 0.02 of its potential returns per unit of risk. Phibro Animal Health is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,202  in Phibro Animal Health on September 2, 2024 and sell it today you would earn a total of  1,135  from holding Phibro Animal Health or generate 94.43% return on investment over 90 days.

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

Alkermes Plc  vs.  Phibro Animal Health

Alkermes Plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alkermes Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Alkermes Plc is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Phibro Animal Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Phibro Animal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkermes Plc and Phibro Animal

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

The idea behind Alkermes Plc and Phibro Animal Health 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 CEOs Directory module to screen CEOs from public companies around the world.