Correlation Between Lees Pharmaceutical and Stemsation International

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

Diversification Opportunities for Lees Pharmaceutical and Stemsation International

-0.36

Correlation Coefficient

Lees Pharmaceutical  Stemsation International

Very good diversification

The 3 months correlation between Lees and Stemsation is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lees Pharmaceutical Holdings and Stemsation International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stemsation International 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 Stemsation International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stemsation International has no effect on the direction of Lees Pharmaceutical i.e., Lees Pharmaceutical and Stemsation International go up and down completely randomly.

Pair Corralation between Lees Pharmaceutical and Stemsation International

If you would invest  3.95  in Stemsation International on September 15, 2024 and sell it today you would lose (2.20) from holding Stemsation International or give up 55.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Lees Pharmaceutical Holdings  vs.  Stemsation International

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.

Stemsation International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stemsation International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Stemsation International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lees Pharmaceutical and Stemsation International

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

The idea behind Lees Pharmaceutical Holdings and Stemsation International 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.