Correlation Between Lees Pharmaceutical and Transocean

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

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

Diversification Opportunities for Lees Pharmaceutical and Transocean

-0.16

Correlation Coefficient

Lees Pharmaceutical  Transocean

Good diversification

The 3 months correlation between Lees and Transocean is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lees Pharmaceutical Holdings and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Lees Pharmaceutical 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 Lees Pharmaceutical Holdings are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Lees Pharmaceutical i.e., Lees Pharmaceutical and Transocean go up and down completely randomly.

Pair Corralation between Lees Pharmaceutical and Transocean

Assuming the 90 days horizon Lees Pharmaceutical Holdings is expected to under-perform the Transocean. In addition to that, Lees Pharmaceutical is 28.19 times more volatile than Transocean. It trades about -0.1 of its total potential returns per unit of risk. Transocean is currently generating about -0.01 per unit of volatility. If you would invest  524.00  in Transocean on September 28, 2024 and sell it today you would lose (171.00) from holding Transocean or give up 32.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.4%
Values	Daily Returns

Lees Pharmaceutical Holdings  vs.  Transocean

Lees Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lees Pharmaceutical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lees Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lees Pharmaceutical and Transocean

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

The idea behind Lees Pharmaceutical Holdings and Transocean 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.