Correlation Between Pacira Pharmaceuticals and Amphastar

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

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

Diversification Opportunities for Pacira Pharmaceuticals and Amphastar

0.63

Correlation Coefficient

Pacira Pharmaceuticals  Amphastar

Poor diversification

The 3 months correlation between Pacira and Amphastar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pacira Pharmaceuticals and Amphastar P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphastar P and Pacira Pharmaceuticals 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 Pacira Pharmaceuticals 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 Pacira Pharmaceuticals i.e., Pacira Pharmaceuticals and Amphastar go up and down completely randomly.

Pair Corralation between Pacira Pharmaceuticals and Amphastar

Given the investment horizon of 90 days Pacira Pharmaceuticals is expected to under-perform the Amphastar. But the stock apears to be less risky and, when comparing its historical volatility, Pacira Pharmaceuticals is 1.29 times less risky than Amphastar. The stock trades about -0.08 of its potential returns per unit of risk. The Amphastar P is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,176  in Amphastar P on February 8, 2024 and sell it today you would earn a total of  92.00  from holding Amphastar P or generate 2.2% return on investment over 90 days.

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

Pacira Pharmaceuticals  vs.  Amphastar P

Pacira Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacira Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Pacira Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 Pacira Pharmaceuticals and Amphastar

The main advantage of trading using opposite Pacira Pharmaceuticals and Amphastar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacira Pharmaceuticals 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 Pacira Pharmaceuticals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.