Correlation Between Power and Big Pharma
Can any of the company-specific risk be diversified away by investing in both Power and Big 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 Power and Big Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power and Big Pharma Split, you can compare the effects of market volatilities on Power and Big 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 Power with a short position of Big Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power and Big Pharma.
Diversification Opportunities for Power and Big Pharma
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Power and Big is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Power and Big Pharma Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Pharma Split and Power 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 Power are associated (or correlated) with Big Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Pharma Split has no effect on the direction of Power i.e., Power and Big Pharma go up and down completely randomly.
Pair Corralation between Power and Big Pharma
Assuming the 90 days trading horizon Power is expected to generate 0.9 times more return on investment than Big Pharma. However, Power is 1.11 times less risky than Big Pharma. It trades about 0.08 of its potential returns per unit of risk. Big Pharma Split is currently generating about 0.02 per unit of risk. If you would invest 3,492 in Power on September 12, 2024 and sell it today you would earn a total of 1,158 from holding Power or generate 33.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power vs. Big Pharma Split
Performance |
| Timeline |
| Power |
| Big Pharma Split |
Power and Big Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power and Big Pharma
The main advantage of trading using opposite Power and Big Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power position performs unexpectedly, Big 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 Big Pharma will offset losses from the drop in Big Pharma's long position.| Power vs. Great West Lifeco | Power vs. Manulife Financial Corp | Power vs. Sun Life Financial | Power vs. Fortis Inc |
| Big Pharma vs. Sustainable Power Infrastructure | Big Pharma vs. Global Dividend Growth | Big Pharma vs. Brompton Lifeco Split | Big Pharma vs. Prime Dividend Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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