Correlation Between Biotron and Processa Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Biotron and Processa 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 Processa 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 Processa Pharmaceuticals, you can compare the effects of market volatilities on Biotron and Processa 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 Processa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotron and Processa Pharmaceuticals.

Diversification Opportunities for Biotron and Processa Pharmaceuticals

0.14

Correlation Coefficient

Biotron  Processa Pharmaceuticals

Average diversification

The 3 months correlation between Biotron and Processa is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Biotron Limited and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa 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 Processa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Processa Pharmaceuticals has no effect on the direction of Biotron i.e., Biotron and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Biotron and Processa Pharmaceuticals

Assuming the 90 days horizon Biotron is expected to generate 1.22 times less return on investment than Processa Pharmaceuticals. But when comparing it to its historical volatility, Biotron Limited is 1.06 times less risky than Processa Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. Processa Pharmaceuticals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Processa Pharmaceuticals on September 12, 2024 and sell it today you would lose (1.00) from holding Processa Pharmaceuticals or give up 0.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Biotron Limited  vs.  Processa Pharmaceuticals

Biotron Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biotron Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Biotron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Processa Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Processa Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Processa Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Biotron and Processa Pharmaceuticals

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

The idea behind Biotron Limited and Processa 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.