Correlation Between Phibro Animal and Plexus Corp

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

Diversification Opportunities for Phibro Animal and Plexus Corp

0.35

Correlation Coefficient

Phibro Animal  Plexus Corp

Weak diversification

The 3 months correlation between Phibro and Plexus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Phibro Animal i.e., Phibro Animal and Plexus Corp go up and down completely randomly.

Pair Corralation between Phibro Animal and Plexus Corp

Assuming the 90 days horizon Phibro Animal is expected to generate 1.01 times less return on investment than Plexus Corp. In addition to that, Phibro Animal is 1.65 times more volatile than Plexus Corp. It trades about 0.09 of its total potential returns per unit of risk. Plexus Corp is currently generating about 0.16 per unit of volatility. If you would invest  8,950  in Plexus Corp on October 12, 2024 and sell it today you would earn a total of  6,850  from holding Plexus Corp or generate 76.54% 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.  Plexus Corp

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Plexus Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Plexus Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Plexus Corp

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

The idea behind Phibro Animal Health and Plexus Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.