Correlation Between Phibro Animal and Zoetis

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

Diversification Opportunities for Phibro Animal and Zoetis

-0.2

Correlation Coefficient

Phibro Animal  Zoetis

Good diversification

The 3 months correlation between Phibro and Zoetis is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Zoetis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoetis Inc 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 Zoetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoetis Inc has no effect on the direction of Phibro Animal i.e., Phibro Animal and Zoetis go up and down completely randomly.

Pair Corralation between Phibro Animal and Zoetis

Given the investment horizon of 90 days Phibro Animal Health is expected to under-perform the Zoetis. In addition to that, Phibro Animal is 1.8 times more volatile than Zoetis Inc. It trades about -0.18 of its total potential returns per unit of risk. Zoetis Inc is currently generating about -0.27 per unit of volatility. If you would invest  17,671  in Zoetis Inc on September 22, 2024 and sell it today you would lose (1,187) from holding Zoetis Inc or give up 6.72% 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.  Zoetis Inc

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

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.

Zoetis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Phibro Animal and Zoetis

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

The idea behind Phibro Animal Health and Zoetis Inc 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 Stocks Directory module to find actively traded stocks across global markets.