Correlation Between CTS and Lees Pharmaceutical

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

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

Diversification Opportunities for CTS and Lees Pharmaceutical

-0.29

Correlation Coefficient

CTS  Lees Pharmaceutical

Very good diversification

The 3 months correlation between CTS and Lees is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and Lees Pharmaceutical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lees Pharmaceutical and CTS 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 CTS Corporation are associated (or correlated) with Lees Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lees Pharmaceutical has no effect on the direction of CTS i.e., CTS and Lees Pharmaceutical go up and down completely randomly.

Pair Corralation between CTS and Lees Pharmaceutical

Considering the 90-day investment horizon CTS Corporation is expected to generate 0.02 times more return on investment than Lees Pharmaceutical. However, CTS Corporation is 49.67 times less risky than Lees Pharmaceutical. It trades about 0.03 of its potential returns per unit of risk. Lees Pharmaceutical Holdings is currently generating about -0.11 per unit of risk. If you would invest  4,249  in CTS Corporation on September 29, 2024 and sell it today you would earn a total of  1,063  from holding CTS Corporation or generate 25.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.27%
Values	Daily Returns

CTS Corp.  vs.  Lees Pharmaceutical Holdings

CTS Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lees Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CTS and Lees Pharmaceutical

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

The idea behind CTS Corporation and Lees Pharmaceutical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.