Correlation Between Pharming Group and OKYO Pharma

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

By analyzing existing cross correlation between Pharming Group NV and OKYO Pharma Ltd, you can compare the effects of market volatilities on Pharming Group and OKYO Pharma 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 Pharming Group with a short position of OKYO Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharming Group and OKYO Pharma.

Diversification Opportunities for Pharming Group and OKYO Pharma

0.45

Correlation Coefficient

Pharming Group  OKYO Pharma

Very weak diversification

The 3 months correlation between Pharming and OKYO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pharming Group NV and OKYO Pharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OKYO Pharma and Pharming Group 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 Pharming Group NV are associated (or correlated) with OKYO Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OKYO Pharma has no effect on the direction of Pharming Group i.e., Pharming Group and OKYO Pharma go up and down completely randomly.

Pair Corralation between Pharming Group and OKYO Pharma

Assuming the 90 days horizon Pharming Group is expected to generate 4.83 times less return on investment than OKYO Pharma. But when comparing it to its historical volatility, Pharming Group NV is 2.04 times less risky than OKYO Pharma. It trades about 0.01 of its potential returns per unit of risk. OKYO Pharma Ltd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  105.00  in OKYO Pharma Ltd on September 16, 2024 and sell it today you would earn a total of  1.00  from holding OKYO Pharma Ltd or generate 0.95% return on investment over 90 days.

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

Pharming Group NV  vs.  OKYO Pharma Ltd

Pharming Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

OKYO Pharma

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Pharming Group and OKYO Pharma

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

The idea behind Pharming Group NV and OKYO Pharma Ltd 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.