Correlation Between Sky Century and Phibro Animal

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

By analyzing existing cross correlation between Sky Century Investment and Phibro Animal Health, you can compare the effects of market volatilities on Sky Century and Phibro Animal 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 Sky Century with a short position of Phibro Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Century and Phibro Animal.

Diversification Opportunities for Sky Century and Phibro Animal

-0.3

Correlation Coefficient

Sky Century  Phibro Animal

Very good diversification

The 3 months correlation between Sky and Phibro is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sky Century Investment and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health and Sky Century 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 Sky Century Investment are associated (or correlated) with Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of Sky Century i.e., Sky Century and Phibro Animal go up and down completely randomly.

Pair Corralation between Sky Century and Phibro Animal

Given the investment horizon of 90 days Sky Century Investment is expected to generate 20.39 times more return on investment than Phibro Animal. However, Sky Century is 20.39 times more volatile than Phibro Animal Health. It trades about 0.14 of its potential returns per unit of risk. Phibro Animal Health is currently generating about 0.08 per unit of risk. If you would invest  0.35  in Sky Century Investment on September 12, 2024 and sell it today you would lose (0.10) from holding Sky Century Investment or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sky Century Investment  vs.  Phibro Animal Health

Sky Century Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Century Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Sky Century demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Phibro Animal Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical indicators, Phibro Animal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sky Century and Phibro Animal

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

The idea behind Sky Century Investment and Phibro Animal Health 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.