Correlation Between Phibro Animal and Amphastar

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

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

Diversification Opportunities for Phibro Animal and Amphastar

-0.2

Correlation Coefficient

Phibro Animal  Amphastar

Good diversification

The 3 months correlation between Phibro and Amphastar is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Amphastar P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphastar P and Phibro Animal 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 Phibro Animal Health are associated (or correlated) with Amphastar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphastar P has no effect on the direction of Phibro Animal i.e., Phibro Animal and Amphastar go up and down completely randomly.

Pair Corralation between Phibro Animal and Amphastar

Given the investment horizon of 90 days Phibro Animal Health is expected to generate 1.8 times more return on investment than Amphastar. However, Phibro Animal is 1.8 times more volatile than Amphastar P. It trades about 0.14 of its potential returns per unit of risk. Amphastar P is currently generating about -0.14 per unit of risk. If you would invest  1,304  in Phibro Animal Health on February 24, 2024 and sell it today you would earn a total of  542.00  from holding Phibro Animal Health or generate 41.56% return on investment over 90 days.

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

Phibro Animal Health  vs.  Amphastar P

Phibro Animal Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, Phibro Animal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Amphastar P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amphastar P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Phibro Animal and Amphastar

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

The idea behind Phibro Animal Health and Amphastar P 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.