Correlation Between Phibro Animal and Procaps Group

Can any of the company-specific risk be diversified away by investing in both Phibro Animal and Procaps Group 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 Procaps Group 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 Procaps Group SA, you can compare the effects of market volatilities on Phibro Animal and Procaps Group 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 Procaps Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phibro Animal and Procaps Group.

Diversification Opportunities for Phibro Animal and Procaps Group

-0.39

Correlation Coefficient

Phibro Animal  Procaps Group

Very good diversification

The 3 months correlation between Phibro and Procaps is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Procaps Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procaps Group SA 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 Procaps Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procaps Group SA has no effect on the direction of Phibro Animal i.e., Phibro Animal and Procaps Group go up and down completely randomly.

Pair Corralation between Phibro Animal and Procaps Group

Given the investment horizon of 90 days Phibro Animal Health is expected to generate 0.32 times more return on investment than Procaps Group. However, Phibro Animal Health is 3.1 times less risky than Procaps Group. It trades about 0.01 of its potential returns per unit of risk. Procaps Group SA is currently generating about -0.08 per unit of risk. If you would invest  2,229  in Phibro Animal Health on November 28, 2024 and sell it today you would lose (17.00) from holding Phibro Animal Health or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Phibro Animal Health  vs.  Procaps Group SA

Phibro Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Procaps Group SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Procaps Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Procaps Group may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Phibro Animal and Procaps Group

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

The idea behind Phibro Animal Health and Procaps Group SA 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.