Correlation Between Phibro Animal and Alterity Therapeutics

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

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

Diversification Opportunities for Phibro Animal and Alterity Therapeutics

0.36

Correlation Coefficient

Phibro Animal  Alterity Therapeutics

Weak diversification

The 3 months correlation between Phibro and Alterity is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Alterity Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alterity Therapeutics and Phibro Animal 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 Phibro Animal Health are associated (or correlated) with Alterity Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alterity Therapeutics has no effect on the direction of Phibro Animal i.e., Phibro Animal and Alterity Therapeutics go up and down completely randomly.

Pair Corralation between Phibro Animal and Alterity Therapeutics

Given the investment horizon of 90 days Phibro Animal is expected to generate 19.54 times less return on investment than Alterity Therapeutics. But when comparing it to its historical volatility, Phibro Animal Health is 2.99 times less risky than Alterity Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Alterity Therapeutics is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Alterity Therapeutics on December 20, 2024 and sell it today you would earn a total of  172.00  from holding Alterity Therapeutics or generate 78.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Phibro Animal Health  vs.  Alterity Therapeutics

Phibro Animal Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Phibro Animal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Alterity Therapeutics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alterity Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Alterity Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Alterity Therapeutics

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

The idea behind Phibro Animal Health and Alterity Therapeutics 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.