isis flying.anp fueling up., page-12

In fact there is third dimension to analize stocks apart from TA and FA and that is from a statistical point of view one of these methods is the Coeffient Correlation.

Definition of 'Correlation'

In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management by traders and large hedge funds .

Investopedia explains 'Correlation'

Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1.
Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction.

Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction.
If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random.

In real life, perfectly correlated securities are rare, rather you will find securities with some degree of correlation.

If we were to assign the correlation coeffient to the movement in SP between ISIS and ANP over a period of 12 months with each number representing the SP at the beginning of each month for the representative stock we can see that there is a correlation coeffient of .0341713 over a 12 month period as represented below, this figure shows some correlation but not particularly strong.


month---- isis---- anp

Aug2011----8.57---- 0.008
Sept ----7.23---- 0.008
oct---- 6.53---- 0.008
nov---- 7.73---- 0.009
dec---- 7.27---- 0.028
jan---- 7.25---- 0.022
feb---- 8.39---- 0.02
mar---- 8.85---- 0.023
apr---- 8.93---- 0.017
may---- 8.09---- 0.015
jun---- 9.72---- 0.017
Jul12----12.94---- 0.023


Correlation 0.341713

However if we compare the correlation coeffient factor of the two stocks ISIS and ANP mentioned over a period of the last month you will find that the correlation has in fact increased by a factor 2.3 times to .788555 as represented below .indicating incresed correlation between the 2 stocks

days ---- isis---- anp

22-Jun---- 11.89---- 0.018
25-Jun---- 11.61---- 0.017
26-Jun---- 11.59---- 0.017
27-Jun---- 11.8---- 0.017
28-Jun---- 11.64---- 0.017
29-Jun---- 12------ 0.018
2-Jul---- 12.94---- 0.018
3-Jul---- 12.92---- 0.02
5-Jul---- 12.97---- 0.02
6-Jul---- 13.17---- 0.02
9-Jul---- 13.99---- 0.023
10-Jul---- 13.56---- 0.025
11-Jul---- 12.63---- 0.025
12-Jul---- 13.19---- 0.024
13 jul---- 13.41---- 0.023

Correlation 0.788555


I also compared ANP to the Aust allords XAO and the health care sector XHJ with both correlations coming in well below 0.341713 which was seen with ISIS also indicating that ANP is more closely correlated to ISIS than the XAO or XHJ sectors .

what does this all mean..

well we have to keep in mind that strong correlation whether it is negative or positive, does not mean that changes in the price of one stock cause the changes in the price of the other.

To determine what causes changes in stock prices, you must analyze the companies’ financial data, and assess the overall market conditions, the economy and the industry in which the companies compete.

Stocks may be cyclical, which means their market price increases when the overall economic conditions improve, and their market price drops when overall economic conditions deteriorate.

Other stocks may be counter-cyclical, which means their market price tends to increase when economic conditions deteriorate, and their market price tends to drop when economic conditions improve.

Two stocks may be positively correlated because both are cyclical, while two other stocks may be negatively correlated because one is cyclical and the other counter-cyclical.


In my conclusion ISIS and ANP both are independent entities at the end of the day but are linked together by the relationship of the pipeline ANP has with ISIS which in shown in the correlation of the share price movement over the short term .The Market Makers and big players may be aware of the relationship and will manipulate the shares together or at least will cause ANP to follow ISIS especially around times of annoucements and speculation of price sentive news .