Correlation Between City View and Phibro Animal

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

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

Diversification Opportunities for City View and Phibro Animal

0.05

Correlation Coefficient

City View  Phibro Animal

Significant diversification

The 3 months correlation between City and Phibro is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding City View Green 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 City View 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 City View Green 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 City View i.e., City View and Phibro Animal go up and down completely randomly.

Pair Corralation between City View and Phibro Animal

Assuming the 90 days horizon City View Green is expected to generate 4.7 times more return on investment than Phibro Animal. However, City View is 4.7 times more volatile than Phibro Animal Health. It trades about 0.07 of its potential returns per unit of risk. Phibro Animal Health is currently generating about 0.03 per unit of risk. If you would invest  0.33  in City View Green on December 28, 2024 and sell it today you would earn a total of  0.05  from holding City View Green or generate 15.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

City View Green  vs.  Phibro Animal Health

City View Green

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City View Green are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, City View reported 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 2 (%) 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 City View and Phibro Animal

The main advantage of trading using opposite City View and Phibro Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City View 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 City View Green 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.