Correlation Between Aspen Pharmacare and Adcock Ingram

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

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

Diversification Opportunities for Aspen Pharmacare and Adcock Ingram

0.71

Correlation Coefficient

Aspen Pharmacare  Adcock Ingram

Poor diversification

The 3 months correlation between Aspen and Adcock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Pharmacare Holdings and Adcock Ingram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adcock Ingram Holdings and Aspen Pharmacare 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 Aspen Pharmacare Holdings are associated (or correlated) with Adcock Ingram. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adcock Ingram Holdings has no effect on the direction of Aspen Pharmacare i.e., Aspen Pharmacare and Adcock Ingram go up and down completely randomly.

Pair Corralation between Aspen Pharmacare and Adcock Ingram

Assuming the 90 days trading horizon Aspen Pharmacare Holdings is expected to under-perform the Adcock Ingram. But the stock apears to be less risky and, when comparing its historical volatility, Aspen Pharmacare Holdings is 1.3 times less risky than Adcock Ingram. The stock trades about -0.1 of its potential returns per unit of risk. The Adcock Ingram Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  682,100  in Adcock Ingram Holdings on September 26, 2024 and sell it today you would lose (18,800) from holding Adcock Ingram Holdings or give up 2.76% of portfolio value over 90 days.

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

Aspen Pharmacare Holdings  vs.  Adcock Ingram Holdings

Aspen Pharmacare Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Pharmacare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Adcock Ingram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adcock Ingram Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adcock Ingram is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aspen Pharmacare and Adcock Ingram

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

The idea behind Aspen Pharmacare Holdings and Adcock Ingram Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.