Correlation Between ANI Pharmaceuticals and Sonoma Pharmaceuticals

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

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

Diversification Opportunities for ANI Pharmaceuticals and Sonoma Pharmaceuticals

0.36

Correlation Coefficient

ANI Pharmaceuticals  Sonoma Pharmaceuticals

Weak diversification

The 3 months correlation between ANI and Sonoma is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ANI Pharmaceuticals and Sonoma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoma Pharmaceuticals and ANI Pharmaceuticals 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 ANI Pharmaceuticals are associated (or correlated) with Sonoma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoma Pharmaceuticals has no effect on the direction of ANI Pharmaceuticals i.e., ANI Pharmaceuticals and Sonoma Pharmaceuticals go up and down completely randomly.

Pair Corralation between ANI Pharmaceuticals and Sonoma Pharmaceuticals

Given the investment horizon of 90 days ANI Pharmaceuticals is expected to generate 1.3 times less return on investment than Sonoma Pharmaceuticals. But when comparing it to its historical volatility, ANI Pharmaceuticals is 2.97 times less risky than Sonoma Pharmaceuticals. It trades about 0.14 of its potential returns per unit of risk. Sonoma Pharmaceuticals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Sonoma Pharmaceuticals on December 27, 2024 and sell it today you would earn a total of  39.00  from holding Sonoma Pharmaceuticals or generate 14.18% return on investment over 90 days.

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

ANI Pharmaceuticals  vs.  Sonoma Pharmaceuticals

ANI Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANI Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, ANI Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Sonoma Pharmaceuticals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sonoma Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Sonoma Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ANI Pharmaceuticals and Sonoma Pharmaceuticals

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

The idea behind ANI Pharmaceuticals and Sonoma Pharmaceuticals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.