Correlation Between Phibro Animal and Alpha Teknova

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

Diversification Opportunities for Phibro Animal and Alpha Teknova

0.75

Correlation Coefficient

Phibro Animal  Alpha Teknova

Poor diversification

The 3 months correlation between Phibro and Alpha is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Alpha Teknova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Teknova 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 Alpha Teknova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Teknova has no effect on the direction of Phibro Animal i.e., Phibro Animal and Alpha Teknova go up and down completely randomly.

Pair Corralation between Phibro Animal and Alpha Teknova

Given the investment horizon of 90 days Phibro Animal is expected to generate 3.48 times less return on investment than Alpha Teknova. But when comparing it to its historical volatility, Phibro Animal Health is 2.94 times less risky than Alpha Teknova. It trades about 0.14 of its potential returns per unit of risk. Alpha Teknova is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  458.00  in Alpha Teknova on September 5, 2024 and sell it today you would earn a total of  352.00  from holding Alpha Teknova or generate 76.86% return on investment over 90 days.

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

Phibro Animal Health  vs.  Alpha Teknova

Phibro Animal Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Phibro Animal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alpha Teknova

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Teknova are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Alpha Teknova displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Alpha Teknova

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

The idea behind Phibro Animal Health and Alpha Teknova 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.