Correlation Between Pharmadrug and BC Bud

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

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

Diversification Opportunities for Pharmadrug and BC Bud

-0.26

Correlation Coefficient

Pharmadrug  BC Bud

Very good diversification

The 3 months correlation between Pharmadrug and BCBCF is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pharmadrug and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud and Pharmadrug 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 Pharmadrug are associated (or correlated) with BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Pharmadrug i.e., Pharmadrug and BC Bud go up and down completely randomly.

Pair Corralation between Pharmadrug and BC Bud

Assuming the 90 days horizon Pharmadrug is expected to generate 1.67 times more return on investment than BC Bud. However, Pharmadrug is 1.67 times more volatile than The BC Bud. It trades about 0.11 of its potential returns per unit of risk. The BC Bud is currently generating about 0.01 per unit of risk. If you would invest  1.02  in Pharmadrug on December 3, 2024 and sell it today you would earn a total of  0.28  from holding Pharmadrug or generate 27.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Pharmadrug  vs.  The BC Bud

Pharmadrug

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmadrug are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Pharmadrug reported solid returns over the last few months and may actually be approaching a breakup point.

BC Bud

Risk-Adjusted Performance

Very Weak

Over the last 90 days The BC Bud has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak fundamental indicators, BC Bud may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pharmadrug and BC Bud

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

The idea behind Pharmadrug and The BC Bud 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..