Correlation Between Avicanna and Pharmacielo

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

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

Diversification Opportunities for Avicanna and Pharmacielo

0.38

Correlation Coefficient

Avicanna  Pharmacielo

Weak diversification

The 3 months correlation between Avicanna and Pharmacielo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Avicanna and Pharmacielo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmacielo and Avicanna 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 Avicanna are associated (or correlated) with Pharmacielo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmacielo has no effect on the direction of Avicanna i.e., Avicanna and Pharmacielo go up and down completely randomly.

Pair Corralation between Avicanna and Pharmacielo

Assuming the 90 days horizon Avicanna is expected to generate 6.51 times less return on investment than Pharmacielo. But when comparing it to its historical volatility, Avicanna is 1.61 times less risky than Pharmacielo. It trades about 0.01 of its potential returns per unit of risk. Pharmacielo is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7.60  in Pharmacielo on September 5, 2024 and sell it today you would lose (1.00) from holding Pharmacielo or give up 13.16% of portfolio value over 90 days.

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

Avicanna  vs.  Pharmacielo

Avicanna

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Avicanna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Avicanna is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pharmacielo

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmacielo are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Pharmacielo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avicanna and Pharmacielo

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

The idea behind Avicanna and Pharmacielo 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.