Correlation Between TC BioPharm and Algernon Pharmaceuticals

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

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

Diversification Opportunities for TC BioPharm and Algernon Pharmaceuticals

0.48

Correlation Coefficient

TC BioPharm  Algernon Pharmaceuticals

Very weak diversification

The 3 months correlation between TCBPW and Algernon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TC BioPharm plc and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and TC BioPharm 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 TC BioPharm plc are associated (or correlated) with Algernon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algernon Pharmaceuticals has no effect on the direction of TC BioPharm i.e., TC BioPharm and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between TC BioPharm and Algernon Pharmaceuticals

Assuming the 90 days horizon TC BioPharm plc is expected to generate 9.62 times more return on investment than Algernon Pharmaceuticals. However, TC BioPharm is 9.62 times more volatile than Algernon Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Algernon Pharmaceuticals is currently generating about 0.04 per unit of risk. If you would invest  3.79  in TC BioPharm plc on September 23, 2024 and sell it today you would lose (2.28) from holding TC BioPharm plc or give up 60.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.34%
Values	Daily Returns

TC BioPharm plc  vs.  Algernon Pharmaceuticals

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.

Algernon Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TC BioPharm and Algernon Pharmaceuticals

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

The idea behind TC BioPharm plc and Algernon Pharmaceuticals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.