Correlation Between Lees Pharmaceutical and Nexien Biopharma

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

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

Diversification Opportunities for Lees Pharmaceutical and Nexien Biopharma

-0.38

Correlation Coefficient

Lees Pharmaceutical  Nexien Biopharma

Very good diversification

The 3 months correlation between Lees and Nexien is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lees Pharmaceutical Holdings and Nexien Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexien Biopharma and Lees Pharmaceutical 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 Lees Pharmaceutical Holdings are associated (or correlated) with Nexien Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexien Biopharma has no effect on the direction of Lees Pharmaceutical i.e., Lees Pharmaceutical and Nexien Biopharma go up and down completely randomly.

Pair Corralation between Lees Pharmaceutical and Nexien Biopharma

Assuming the 90 days horizon Lees Pharmaceutical Holdings is expected to under-perform the Nexien Biopharma. In addition to that, Lees Pharmaceutical is 3.17 times more volatile than Nexien Biopharma. It trades about -0.09 of its total potential returns per unit of risk. Nexien Biopharma is currently generating about 0.11 per unit of volatility. If you would invest  4.00  in Nexien Biopharma on September 5, 2024 and sell it today you would lose (2.60) from holding Nexien Biopharma or give up 65.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.48%
Values	Daily Returns

Lees Pharmaceutical Holdings  vs.  Nexien Biopharma

Lees Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nexien Biopharma

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexien Biopharma are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Nexien Biopharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lees Pharmaceutical and Nexien Biopharma

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

The idea behind Lees Pharmaceutical Holdings and Nexien Biopharma 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.