Correlation Between ASPEN PHARUNADR and Phibro Animal

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

By analyzing existing cross correlation between ASPEN PHARUNADR 1 and Phibro Animal Health, you can compare the effects of market volatilities on ASPEN PHARUNADR 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 ASPEN PHARUNADR with a short position of Phibro Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN PHARUNADR and Phibro Animal.

Diversification Opportunities for ASPEN PHARUNADR and Phibro Animal

-0.54

Correlation Coefficient

ASPEN PHARUNADR  Phibro Animal

Excellent diversification

The 3 months correlation between ASPEN and Phibro is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN PHARUNADR 1 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 ASPEN PHARUNADR 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 ASPEN PHARUNADR 1 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 ASPEN PHARUNADR i.e., ASPEN PHARUNADR and Phibro Animal go up and down completely randomly.

Pair Corralation between ASPEN PHARUNADR and Phibro Animal

Assuming the 90 days trading horizon ASPEN PHARUNADR 1 is expected to under-perform the Phibro Animal. But the stock apears to be less risky and, when comparing its historical volatility, ASPEN PHARUNADR 1 is 1.38 times less risky than Phibro Animal. The stock trades about -0.11 of its potential returns per unit of risk. The Phibro Animal Health is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,009  in Phibro Animal Health on October 6, 2024 and sell it today you would lose (9.00) from holding Phibro Animal Health or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

ASPEN PHARUNADR 1  vs.  Phibro Animal Health

ASPEN PHARUNADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASPEN PHARUNADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Phibro Animal Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Phibro Animal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ASPEN PHARUNADR and Phibro Animal

The main advantage of trading using opposite ASPEN PHARUNADR and Phibro Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASPEN PHARUNADR 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 ASPEN PHARUNADR 1 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.