Correlation Between PsyBio Therapeutics and TC BioPharm

Can any of the company-specific risk be diversified away by investing in both PsyBio Therapeutics and TC BioPharm 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 PsyBio Therapeutics and TC BioPharm into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PsyBio Therapeutics Corp and TC BioPharm plc, you can compare the effects of market volatilities on PsyBio Therapeutics and TC BioPharm 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 PsyBio Therapeutics with a short position of TC BioPharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of PsyBio Therapeutics and TC BioPharm.

Diversification Opportunities for PsyBio Therapeutics and TC BioPharm

0.36

Correlation Coefficient

PsyBio Therapeutics  TC BioPharm

Weak diversification

The 3 months correlation between PsyBio and TCBPW is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PsyBio Therapeutics Corp and TC BioPharm plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC BioPharm plc and PsyBio Therapeutics 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 PsyBio Therapeutics Corp are associated (or correlated) with TC BioPharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC BioPharm plc has no effect on the direction of PsyBio Therapeutics i.e., PsyBio Therapeutics and TC BioPharm go up and down completely randomly.

Pair Corralation between PsyBio Therapeutics and TC BioPharm

Assuming the 90 days horizon PsyBio Therapeutics Corp is expected to under-perform the TC BioPharm. But the pink sheet apears to be less risky and, when comparing its historical volatility, PsyBio Therapeutics Corp is 1.84 times less risky than TC BioPharm. The pink sheet trades about -0.15 of its potential returns per unit of risk. The TC BioPharm plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.50  in TC BioPharm plc on September 23, 2024 and sell it today you would lose (0.99) from holding TC BioPharm plc or give up 39.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

PsyBio Therapeutics Corp  vs.  TC BioPharm plc

PsyBio Therapeutics Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PsyBio Therapeutics Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, PsyBio Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

TC BioPharm plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC BioPharm plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TC BioPharm showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PsyBio Therapeutics and TC BioPharm

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

The idea behind PsyBio Therapeutics Corp and TC BioPharm plc 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.