Correlation Between ProPhase Labs and Processa Pharmaceuticals

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

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

Diversification Opportunities for ProPhase Labs and Processa Pharmaceuticals

0.22

Correlation Coefficient

ProPhase Labs  Processa Pharmaceuticals

Modest diversification

The 3 months correlation between ProPhase and Processa is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ProPhase Labs and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa Pharmaceuticals and ProPhase Labs 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 ProPhase Labs are associated (or correlated) with Processa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Processa Pharmaceuticals has no effect on the direction of ProPhase Labs i.e., ProPhase Labs and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between ProPhase Labs and Processa Pharmaceuticals

Given the investment horizon of 90 days ProPhase Labs is expected to generate 2.63 times less return on investment than Processa Pharmaceuticals. But when comparing it to its historical volatility, ProPhase Labs is 1.09 times less risky than Processa Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Processa Pharmaceuticals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Processa Pharmaceuticals on August 11, 2025 and sell it today you would earn a total of  9.00  from holding Processa Pharmaceuticals or generate 40.91% return on investment over 90 days.

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

ProPhase Labs  vs.  Processa Pharmaceuticals

ProPhase Labs

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in ProPhase Labs are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, ProPhase Labs demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Processa Pharmaceuticals

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Processa Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Processa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProPhase Labs and Processa Pharmaceuticals

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

The idea behind ProPhase Labs and Processa Pharmaceuticals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.