Correlation Between Phibro Animal and OWC Pharmaceutical

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

By analyzing existing cross correlation between Phibro Animal Health and OWC Pharmaceutical Research, you can compare the effects of market volatilities on Phibro Animal and OWC Pharmaceutical 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 Phibro Animal with a short position of OWC Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phibro Animal and OWC Pharmaceutical.

Diversification Opportunities for Phibro Animal and OWC Pharmaceutical

0.29

Correlation Coefficient

Phibro Animal  OWC Pharmaceutical

Modest diversification

The 3 months correlation between Phibro and OWC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and OWC Pharmaceutical Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OWC Pharmaceutical and Phibro Animal 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 Phibro Animal Health are associated (or correlated) with OWC Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OWC Pharmaceutical has no effect on the direction of Phibro Animal i.e., Phibro Animal and OWC Pharmaceutical go up and down completely randomly.

Pair Corralation between Phibro Animal and OWC Pharmaceutical

Given the investment horizon of 90 days Phibro Animal is expected to generate 886.03 times less return on investment than OWC Pharmaceutical. But when comparing it to its historical volatility, Phibro Animal Health is 149.31 times less risky than OWC Pharmaceutical. It trades about 0.05 of its potential returns per unit of risk. OWC Pharmaceutical Research is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  0.01  in OWC Pharmaceutical Research on September 15, 2024 and sell it today you would earn a total of  0.00  from holding OWC Pharmaceutical Research or generate 0.0% return on investment over 90 days.

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

Phibro Animal Health  vs.  OWC Pharmaceutical Research

Phibro Animal Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Phibro Animal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

OWC Pharmaceutical

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OWC Pharmaceutical Research are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, OWC Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and OWC Pharmaceutical

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

The idea behind Phibro Animal Health and OWC Pharmaceutical Research 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.