Correlation Between ABCO Electronics and Pharmicell

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Can any of the company-specific risk be diversified away by investing in both ABCO Electronics and Pharmicell 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 ABCO Electronics and Pharmicell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABCO Electronics Co and Pharmicell, you can compare the effects of market volatilities on ABCO Electronics and Pharmicell 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 ABCO Electronics with a short position of Pharmicell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and Pharmicell.

Diversification Opportunities for ABCO Electronics and Pharmicell

ABCOPharmicellDiversified AwayABCOPharmicellDiversified Away100%
0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ABCO and Pharmicell is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and Pharmicell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmicell and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with Pharmicell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmicell has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and Pharmicell go up and down completely randomly.

Pair Corralation between ABCO Electronics and Pharmicell

Assuming the 90 days trading horizon ABCO Electronics is expected to generate 2.91 times less return on investment than Pharmicell. But when comparing it to its historical volatility, ABCO Electronics Co is 1.38 times less risky than Pharmicell. It trades about 0.09 of its potential returns per unit of risk. Pharmicell is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  524,000  in Pharmicell on November 5, 2024 and sell it today you would earn a total of  274,000  from holding Pharmicell or generate 52.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ABCO Electronics Co  vs.  Pharmicell

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -20020406080
JavaScript chart by amCharts 3.21.15036010 005690
       Timeline  
ABCO Electronics 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ABCO Electronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABCO Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJanFeb4,0004,5005,0005,5006,000
Pharmicell 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pharmicell sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJanFeb5,0006,0007,0008,0009,000

ABCO Electronics and Pharmicell Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.91-7.42-4.93-2.450.04152.555.147.7310.32 0.0200.0250.0300.0350.040
JavaScript chart by amCharts 3.21.15036010 005690
       Returns  

Pair Trading with ABCO Electronics and Pharmicell

The main advantage of trading using opposite ABCO Electronics and Pharmicell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABCO Electronics position performs unexpectedly, Pharmicell 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 Pharmicell will offset losses from the drop in Pharmicell's long position.
The idea behind ABCO Electronics Co and Pharmicell 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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