Correlation Between Pharma Bio and Pacific Health

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

By analyzing existing cross correlation between Pharma Bio Serv and Pacific Health Care, you can compare the effects of market volatilities on Pharma Bio and Pacific Health 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 Pharma Bio with a short position of Pacific Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharma Bio and Pacific Health.

Diversification Opportunities for Pharma Bio and Pacific Health

0.25

Correlation Coefficient

Pharma Bio  Pacific Health

Modest diversification

The 3 months correlation between Pharma and Pacific is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pharma Bio Serv and Pacific Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Health Care and Pharma Bio 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 Pharma Bio Serv are associated (or correlated) with Pacific Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Health Care has no effect on the direction of Pharma Bio i.e., Pharma Bio and Pacific Health go up and down completely randomly.

Pair Corralation between Pharma Bio and Pacific Health

Given the investment horizon of 90 days Pharma Bio Serv is expected to under-perform the Pacific Health. In addition to that, Pharma Bio is 2.37 times more volatile than Pacific Health Care. It trades about 0.0 of its total potential returns per unit of risk. Pacific Health Care is currently generating about 0.02 per unit of volatility. If you would invest  83.00  in Pacific Health Care on September 17, 2024 and sell it today you would earn a total of  1.00  from holding Pacific Health Care or generate 1.2% return on investment over 90 days.

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

Pharma Bio Serv  vs.  Pacific Health Care

Pharma Bio Serv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pharma Bio Serv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pharma Bio is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pacific Health Care

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Health Care are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Pacific Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pharma Bio and Pacific Health

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

The idea behind Pharma Bio Serv and Pacific Health Care 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.