Correlation Between Emergent Biosolutions and Zoetis

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

By analyzing existing cross correlation between Emergent Biosolutions and Zoetis Inc, you can compare the effects of market volatilities on Emergent Biosolutions and Zoetis 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 Zoetis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emergent Biosolutions and Zoetis.

Diversification Opportunities for Emergent Biosolutions and Zoetis

0.09

Correlation Coefficient

Emergent Biosolutions  Zoetis

Significant diversification

The 3 months correlation between Emergent and Zoetis is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Biosolutions and Zoetis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoetis Inc 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 Zoetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoetis Inc has no effect on the direction of Emergent Biosolutions i.e., Emergent Biosolutions and Zoetis go up and down completely randomly.

Pair Corralation between Emergent Biosolutions and Zoetis

Considering the 90-day investment horizon Emergent Biosolutions is expected to under-perform the Zoetis. In addition to that, Emergent Biosolutions is 4.2 times more volatile than Zoetis Inc. It trades about -0.06 of its total potential returns per unit of risk. Zoetis Inc is currently generating about 0.03 per unit of volatility. If you would invest  14,556  in Zoetis Inc on January 31, 2024 and sell it today you would earn a total of  1,414  from holding Zoetis Inc or generate 9.71% return on investment over 90 days.

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

Emergent Biosolutions  vs.  Zoetis Inc

Emergent Biosolutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 4 (%) 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.

Zoetis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Emergent Biosolutions and Zoetis

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

The idea behind Emergent Biosolutions and Zoetis Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.