Correlation Between CannaPharmaRx and Phibro Animal

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

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

Diversification Opportunities for CannaPharmaRx and Phibro Animal

-0.22

Correlation Coefficient

CannaPharmaRx  Phibro Animal

Very good diversification

The 3 months correlation between CannaPharmaRx and Phibro is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CannaPharmaRx and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health and CannaPharmaRx 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 CannaPharmaRx are associated (or correlated) with Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of CannaPharmaRx i.e., CannaPharmaRx and Phibro Animal go up and down completely randomly.

Pair Corralation between CannaPharmaRx and Phibro Animal

Given the investment horizon of 90 days CannaPharmaRx is expected to generate 5.66 times more return on investment than Phibro Animal. However, CannaPharmaRx is 5.66 times more volatile than Phibro Animal Health. It trades about 0.01 of its potential returns per unit of risk. Phibro Animal Health is currently generating about 0.02 per unit of risk. If you would invest  0.90  in CannaPharmaRx on December 24, 2024 and sell it today you would lose (0.50) from holding CannaPharmaRx or give up 55.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

CannaPharmaRx  vs.  Phibro Animal Health

CannaPharmaRx

Risk-Adjusted Performance

Very Weak

Over the last 90 days CannaPharmaRx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent primary indicators, CannaPharmaRx exhibited solid returns over the last few months and may actually be approaching a breakup point.

Phibro Animal Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Phibro Animal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CannaPharmaRx and Phibro Animal

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

The idea behind CannaPharmaRx and Phibro Animal Health 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.