Correlation Between Elite Pharma and Amarantus Bioscience

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

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

Diversification Opportunities for Elite Pharma and Amarantus Bioscience

-0.2

Correlation Coefficient

Elite Pharma  Amarantus Bioscience

Good diversification

The 3 months correlation between Elite and Amarantus is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Elite Pharma and Amarantus Bioscience Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarantus Bioscience and Elite Pharma 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 Elite Pharma are associated (or correlated) with Amarantus Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarantus Bioscience has no effect on the direction of Elite Pharma i.e., Elite Pharma and Amarantus Bioscience go up and down completely randomly.

Pair Corralation between Elite Pharma and Amarantus Bioscience

Given the investment horizon of 90 days Elite Pharma is expected to generate 7.64 times less return on investment than Amarantus Bioscience. But when comparing it to its historical volatility, Elite Pharma is 6.32 times less risky than Amarantus Bioscience. It trades about 0.07 of its potential returns per unit of risk. Amarantus Bioscience Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.13  in Amarantus Bioscience Holdings on September 29, 2024 and sell it today you would lose (0.12) from holding Amarantus Bioscience Holdings or give up 92.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.25%
Values	Daily Returns

Elite Pharma  vs.  Amarantus Bioscience Holdings

Elite Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Elite Pharma is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Amarantus Bioscience

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amarantus Bioscience Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Amarantus Bioscience unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elite Pharma and Amarantus Bioscience

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

The idea behind Elite Pharma and Amarantus Bioscience 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.