Correlation Between Processa Pharmaceuticals and ABVC Biopharma

Can any of the company-specific risk be diversified away by investing in both Processa Pharmaceuticals and ABVC Biopharma 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 Processa Pharmaceuticals and ABVC Biopharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Processa Pharmaceuticals and ABVC Biopharma, you can compare the effects of market volatilities on Processa Pharmaceuticals and ABVC Biopharma 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 Processa Pharmaceuticals with a short position of ABVC Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Processa Pharmaceuticals and ABVC Biopharma.

Diversification Opportunities for Processa Pharmaceuticals and ABVC Biopharma

-0.46

Correlation Coefficient

Processa Pharmaceuticals  ABVC Biopharma

Very good diversification

The 3 months correlation between Processa and ABVC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Processa Pharmaceuticals and ABVC Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABVC Biopharma and Processa Pharmaceuticals 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 Processa Pharmaceuticals are associated (or correlated) with ABVC Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABVC Biopharma has no effect on the direction of Processa Pharmaceuticals i.e., Processa Pharmaceuticals and ABVC Biopharma go up and down completely randomly.

Pair Corralation between Processa Pharmaceuticals and ABVC Biopharma

Given the investment horizon of 90 days Processa Pharmaceuticals is expected to under-perform the ABVC Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, Processa Pharmaceuticals is 1.31 times less risky than ABVC Biopharma. The stock trades about -0.28 of its potential returns per unit of risk. The ABVC Biopharma is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  59.00  in ABVC Biopharma on December 29, 2024 and sell it today you would earn a total of  27.00  from holding ABVC Biopharma or generate 45.76% return on investment over 90 days.

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

Processa Pharmaceuticals  vs.  ABVC Biopharma

Processa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Processa Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ABVC Biopharma

Risk-Adjusted Performance

OK

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

Pair Trading with Processa Pharmaceuticals and ABVC Biopharma

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

The idea behind Processa Pharmaceuticals and ABVC Biopharma 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.