Correlation Between Pharmather Holdings and Therasense

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

By analyzing existing cross correlation between Pharmather Holdings and Therasense, you can compare the effects of market volatilities on Pharmather Holdings and Therasense 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 Pharmather Holdings with a short position of Therasense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharmather Holdings and Therasense.

Diversification Opportunities for Pharmather Holdings and Therasense

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Correlation Coefficient

Pharmather Holdings  Therasense

Pay attention - limited upside

The 3 months correlation between Pharmather and Therasense is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pharmather Holdings and Therasense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therasense and Pharmather Holdings 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 Pharmather Holdings are associated (or correlated) with Therasense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therasense has no effect on the direction of Pharmather Holdings i.e., Pharmather Holdings and Therasense go up and down completely randomly.

Pair Corralation between Pharmather Holdings and Therasense

Assuming the 90 days horizon Pharmather Holdings is expected to generate 0.52 times more return on investment than Therasense. However, Pharmather Holdings is 1.91 times less risky than Therasense. It trades about -0.03 of its potential returns per unit of risk. Therasense is currently generating about -0.13 per unit of risk. If you would invest  21.00  in Pharmather Holdings on September 13, 2024 and sell it today you would lose (5.00) from holding Pharmather Holdings or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pharmather Holdings  vs.  Therasense

Pharmather Holdings

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Pharmather Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Therasense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therasense has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Pharmather Holdings and Therasense

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

The idea behind Pharmather Holdings and Therasense 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.