Correlation Between TC BioPharm and Wesana Health

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

Diversification Opportunities for TC BioPharm and Wesana Health

-0.19

Correlation Coefficient

TC BioPharm  Wesana Health

Good diversification

The 3 months correlation between TCBPW and Wesana is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding TC BioPharm plc and Wesana Health Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesana Health Holdings 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 Wesana Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesana Health Holdings has no effect on the direction of TC BioPharm i.e., TC BioPharm and Wesana Health go up and down completely randomly.

Pair Corralation between TC BioPharm and Wesana Health

Assuming the 90 days horizon TC BioPharm is expected to generate 17.08 times less return on investment than Wesana Health. But when comparing it to its historical volatility, TC BioPharm plc is 6.23 times less risky than Wesana Health. It trades about 0.08 of its potential returns per unit of risk. Wesana Health Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Wesana Health Holdings on October 14, 2024 and sell it today you would lose (0.05) from holding Wesana Health Holdings or give up 8.33% of portfolio value over 90 days.

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

TC BioPharm plc  vs.  Wesana Health Holdings

TC BioPharm plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TC BioPharm plc are ranked lower than 5 (%) 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.

Wesana Health Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wesana Health Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Wesana Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TC BioPharm and Wesana Health

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

The idea behind TC BioPharm plc and Wesana Health 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.