Correlation Between Emergent Biosolutions and FSD Pharma

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

By analyzing existing cross correlation between Emergent Biosolutions and FSD Pharma Class, you can compare the effects of market volatilities on Emergent Biosolutions and FSD 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 Emergent Biosolutions with a short position of FSD Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emergent Biosolutions and FSD Pharma.

Diversification Opportunities for Emergent Biosolutions and FSD Pharma

0.08

Correlation Coefficient

Emergent Biosolutions  FSD Pharma

Significant diversification

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

Pair Corralation between Emergent Biosolutions and FSD Pharma

Considering the 90-day investment horizon Emergent Biosolutions is expected to generate 1.78 times more return on investment than FSD Pharma. However, Emergent Biosolutions is 1.78 times more volatile than FSD Pharma Class. It trades about -0.26 of its potential returns per unit of risk. FSD Pharma Class is currently generating about -0.48 per unit of risk. If you would invest  247.00  in Emergent Biosolutions on January 17, 2024 and sell it today you would lose (49.00) from holding Emergent Biosolutions or give up 19.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Emergent Biosolutions  vs.  FSD Pharma Class

Emergent Biosolutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

FSD Pharma Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FSD Pharma Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Emergent Biosolutions and FSD Pharma

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

The idea behind Emergent Biosolutions and FSD Pharma Class 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.