Correlation Between FSD Pharma and GLG Life

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

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

Diversification Opportunities for FSD Pharma and GLG Life

0.35

Correlation Coefficient

FSD Pharma  GLG Life

Weak diversification

The 3 months correlation between FSD and GLG is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding FSD Pharma Class and GLG Life Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLG Life Tech and FSD Pharma 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 FSD Pharma Class are associated (or correlated) with GLG Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLG Life Tech has no effect on the direction of FSD Pharma i.e., FSD Pharma and GLG Life go up and down completely randomly.

Pair Corralation between FSD Pharma and GLG Life

Given the investment horizon of 90 days FSD Pharma Class is expected to under-perform the GLG Life. But the stock apears to be less risky and, when comparing its historical volatility, FSD Pharma Class is 4.85 times less risky than GLG Life. The stock trades about -0.02 of its potential returns per unit of risk. The GLG Life Tech is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6.15  in GLG Life Tech on January 25, 2024 and sell it today you would lose (1.33) from holding GLG Life Tech or give up 21.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	38.99%
Values	Daily Returns

FSD Pharma Class  vs.  GLG Life Tech

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.

GLG Life Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GLG Life Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, GLG Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FSD Pharma and GLG Life

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

The idea behind FSD Pharma Class and GLG Life Tech 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 Commodity Directory module to find actively traded commodities issued by global exchanges.