Correlation Between Grey Cloak and PharmChem

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

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

Diversification Opportunities for Grey Cloak and PharmChem

0.37

Correlation Coefficient

Grey Cloak  PharmChem

Weak diversification

The 3 months correlation between Grey and PharmChem is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Grey Cloak Tech and PharmChem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmChem and Grey Cloak 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 Grey Cloak Tech are associated (or correlated) with PharmChem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmChem has no effect on the direction of Grey Cloak i.e., Grey Cloak and PharmChem go up and down completely randomly.

Pair Corralation between Grey Cloak and PharmChem

Given the investment horizon of 90 days Grey Cloak Tech is expected to generate 8.03 times more return on investment than PharmChem. However, Grey Cloak is 8.03 times more volatile than PharmChem. It trades about 0.11 of its potential returns per unit of risk. PharmChem is currently generating about -0.17 per unit of risk. If you would invest  225.00  in Grey Cloak Tech on September 22, 2024 and sell it today you would earn a total of  27.00  from holding Grey Cloak Tech or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Grey Cloak Tech  vs.  PharmChem

Grey Cloak Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grey Cloak Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Grey Cloak showed solid returns over the last few months and may actually be approaching a breakup point.

PharmChem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PharmChem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, PharmChem is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Grey Cloak and PharmChem

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

The idea behind Grey Cloak Tech and PharmChem 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.