Correlation Between Biotron and Algernon Pharmaceuticals

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

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

Diversification Opportunities for Biotron and Algernon Pharmaceuticals

0.45

Correlation Coefficient

Biotron  Algernon Pharmaceuticals

Very weak diversification

The 3 months correlation between Biotron and Algernon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Biotron Limited and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and Biotron 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 Biotron Limited are associated (or correlated) with Algernon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algernon Pharmaceuticals has no effect on the direction of Biotron i.e., Biotron and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Biotron and Algernon Pharmaceuticals

Assuming the 90 days horizon Biotron Limited is expected to under-perform the Algernon Pharmaceuticals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Biotron Limited is 1.4 times less risky than Algernon Pharmaceuticals. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Algernon Pharmaceuticals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Algernon Pharmaceuticals on September 3, 2024 and sell it today you would lose (5.51) from holding Algernon Pharmaceuticals or give up 50.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Biotron Limited  vs.  Algernon Pharmaceuticals

Biotron Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Algernon Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Biotron and Algernon Pharmaceuticals

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

The idea behind Biotron Limited and Algernon 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.