Correlation Between TC BioPharm and Protagenic Therapeutics

Can any of the company-specific risk be diversified away by investing in both TC BioPharm and Protagenic Therapeutics 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 Protagenic Therapeutics 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 Protagenic Therapeutics, you can compare the effects of market volatilities on TC BioPharm and Protagenic Therapeutics 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 Protagenic Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TC BioPharm and Protagenic Therapeutics.

Diversification Opportunities for TC BioPharm and Protagenic Therapeutics

0.24

Correlation Coefficient

TC BioPharm  Protagenic Therapeutics

Modest diversification

The 3 months correlation between TCBPW and Protagenic is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding TC BioPharm plc and Protagenic Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protagenic Therapeutics 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 Protagenic Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protagenic Therapeutics has no effect on the direction of TC BioPharm i.e., TC BioPharm and Protagenic Therapeutics go up and down completely randomly.

Pair Corralation between TC BioPharm and Protagenic Therapeutics

Assuming the 90 days horizon TC BioPharm is expected to generate 3.9 times less return on investment than Protagenic Therapeutics. But when comparing it to its historical volatility, TC BioPharm plc is 1.79 times less risky than Protagenic Therapeutics. It trades about 0.03 of its potential returns per unit of risk. Protagenic Therapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.45  in Protagenic Therapeutics on December 30, 2024 and sell it today you would lose (0.11) from holding Protagenic Therapeutics or give up 24.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.57%
Values	Daily Returns

TC BioPharm plc  vs.  Protagenic Therapeutics

TC BioPharm plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TC BioPharm plc are ranked lower than 2 (%) 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.

Protagenic Therapeutics

Risk-Adjusted Performance

Modest

Over the last 90 days Protagenic Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Protagenic Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TC BioPharm and Protagenic Therapeutics

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

The idea behind TC BioPharm plc and Protagenic Therapeutics 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.

Check out your portfolio center.

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.