Correlation Between Zoetis and Agios Pharm

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

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

Diversification Opportunities for Zoetis and Agios Pharm

0.23

Correlation Coefficient

Zoetis  Agios Pharm

Modest diversification

The 3 months correlation between Zoetis and Agios is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc and Agios Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agios Pharm and Zoetis 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 Zoetis Inc are associated (or correlated) with Agios Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agios Pharm has no effect on the direction of Zoetis i.e., Zoetis and Agios Pharm go up and down completely randomly.

Pair Corralation between Zoetis and Agios Pharm

Considering the 90-day investment horizon Zoetis Inc is expected to generate 0.64 times more return on investment than Agios Pharm. However, Zoetis Inc is 1.56 times less risky than Agios Pharm. It trades about 0.01 of its potential returns per unit of risk. Agios Pharm is currently generating about -0.04 per unit of risk. If you would invest  16,410  in Zoetis Inc on December 27, 2024 and sell it today you would earn a total of  92.00  from holding Zoetis Inc or generate 0.56% return on investment over 90 days.

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

Zoetis Inc  vs.  Agios Pharm

Zoetis Inc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zoetis Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zoetis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Agios Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agios Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Agios Pharm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Zoetis and Agios Pharm

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

The idea behind Zoetis Inc and Agios Pharm 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.