Correlation Between Pure Extracts and Khiron Life

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

By analyzing existing cross correlation between Pure Extracts Technologies and Khiron Life Sciences, you can compare the effects of market volatilities on Pure Extracts and Khiron Life 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 Pure Extracts with a short position of Khiron Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Extracts and Khiron Life.

Diversification Opportunities for Pure Extracts and Khiron Life

0.08

Correlation Coefficient

Pure Extracts  Khiron Life

Significant diversification

The 3 months correlation between Pure and Khiron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pure Extracts Technologies and Khiron Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khiron Life Sciences and Pure Extracts 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 Pure Extracts Technologies are associated (or correlated) with Khiron Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khiron Life Sciences has no effect on the direction of Pure Extracts i.e., Pure Extracts and Khiron Life go up and down completely randomly.

Pair Corralation between Pure Extracts and Khiron Life

Assuming the 90 days horizon Pure Extracts is expected to generate 4.41 times less return on investment than Khiron Life. But when comparing it to its historical volatility, Pure Extracts Technologies is 4.11 times less risky than Khiron Life. It trades about 0.05 of its potential returns per unit of risk. Khiron Life Sciences is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.60  in Khiron Life Sciences on September 10, 2024 and sell it today you would lose (3.59) from holding Khiron Life Sciences or give up 99.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	29.7%
Values	Daily Returns

Pure Extracts Technologies  vs.  Khiron Life Sciences

Pure Extracts Techno

Risk-Adjusted Performance

0 of 100

Very Weak

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

Khiron Life Sciences

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Khiron Life Sciences are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Khiron Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pure Extracts and Khiron Life

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

The idea behind Pure Extracts Technologies and Khiron Life Sciences 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.