Correlation Between Regeneron Pharmaceuticals and Pharmather Holdings

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

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

Diversification Opportunities for Regeneron Pharmaceuticals and Pharmather Holdings

0.68

Correlation Coefficient

Regeneron Pharmaceuticals  Pharmather Holdings

Poor diversification

The 3 months correlation between Regeneron and Pharmather is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Regeneron Pharmaceuticals and Pharmather Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmather Holdings and Regeneron 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 Regeneron Pharmaceuticals are associated (or correlated) with Pharmather Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmather Holdings has no effect on the direction of Regeneron Pharmaceuticals i.e., Regeneron Pharmaceuticals and Pharmather Holdings go up and down completely randomly.

Pair Corralation between Regeneron Pharmaceuticals and Pharmather Holdings

Given the investment horizon of 90 days Regeneron Pharmaceuticals is expected to under-perform the Pharmather Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Regeneron Pharmaceuticals is 2.91 times less risky than Pharmather Holdings. The stock trades about -0.11 of its potential returns per unit of risk. The Pharmather Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Pharmather Holdings on December 5, 2024 and sell it today you would lose (2.00) from holding Pharmather Holdings or give up 11.76% of portfolio value over 90 days.

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

Regeneron Pharmaceuticals  vs.  Pharmather Holdings

Regeneron Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regeneron Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pharmather Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pharmather Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pharmather Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Regeneron Pharmaceuticals and Pharmather Holdings

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

The idea behind Regeneron Pharmaceuticals and Pharmather Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.