Correlation Between Phibro Animal and HEALTHSTREAM (HL5SG)

Can any of the company-specific risk be diversified away by investing in both Phibro Animal and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM, you can compare the effects of market volatilities on Phibro Animal and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Phibro Animal and HEALTHSTREAM (HL5SG).

Diversification Opportunities for Phibro Animal and HEALTHSTREAM (HL5SG)

0.64

Correlation Coefficient

Phibro Animal  HEALTHSTREAM (HL5SG)

Poor diversification

The 3 months correlation between Phibro and HEALTHSTREAM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and HEALTHSTREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHSTREAM (HL5SG) has no effect on the direction of Phibro Animal i.e., Phibro Animal and HEALTHSTREAM (HL5SG) go up and down completely randomly.

Pair Corralation between Phibro Animal and HEALTHSTREAM (HL5SG)

Assuming the 90 days horizon Phibro Animal Health is expected to generate 2.25 times more return on investment than HEALTHSTREAM (HL5SG). However, Phibro Animal is 2.25 times more volatile than HEALTHSTREAM. It trades about 0.0 of its potential returns per unit of risk. HEALTHSTREAM is currently generating about -0.06 per unit of risk. If you would invest  2,050  in Phibro Animal Health on December 25, 2024 and sell it today you would lose (50.00) from holding Phibro Animal Health or give up 2.44% of portfolio value over 90 days.

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

Phibro Animal Health  vs.  HEALTHSTREAM

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. Despite nearly stable basic indicators, Phibro Animal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHSTREAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEALTHSTREAM (HL5SG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Phibro Animal and HEALTHSTREAM (HL5SG)

The main advantage of trading using opposite Phibro Animal and HEALTHSTREAM (HL5SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal position performs unexpectedly, HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) will offset losses from the drop in HEALTHSTREAM (HL5SG)'s long position.

The idea behind Phibro Animal Health and HEALTHSTREAM 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.