Correlation Between Regional Container and Inter Pharma

Can any of the company-specific risk be diversified away by investing in both Regional Container and Inter Pharma 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 Regional Container and Inter Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Regional Container Lines and Inter Pharma Public, you can compare the effects of market volatilities on Regional Container and Inter Pharma 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 Regional Container with a short position of Inter Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Container and Inter Pharma.

Diversification Opportunities for Regional Container and Inter Pharma

0.53

Correlation Coefficient

Regional Container  Inter Pharma

Very weak diversification

The 3 months correlation between Regional and Inter is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and Inter Pharma Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Pharma Public and Regional Container 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 Regional Container Lines are associated (or correlated) with Inter Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Pharma Public has no effect on the direction of Regional Container i.e., Regional Container and Inter Pharma go up and down completely randomly.

Pair Corralation between Regional Container and Inter Pharma

Assuming the 90 days trading horizon Regional Container Lines is expected to under-perform the Inter Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Regional Container Lines is 2.66 times less risky than Inter Pharma. The stock trades about -0.07 of its potential returns per unit of risk. The Inter Pharma Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  324.00  in Inter Pharma Public on December 22, 2024 and sell it today you would earn a total of  38.00  from holding Inter Pharma Public or generate 11.73% return on investment over 90 days.

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

Regional Container Lines  vs.  Inter Pharma Public

Regional Container Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Container Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Inter Pharma Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Pharma Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Inter Pharma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regional Container and Inter Pharma

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

The idea behind Regional Container Lines and Inter Pharma Public 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.