Correlation Between Almirall and Pharma Mar

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

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

Diversification Opportunities for Almirall and Pharma Mar

0.61

Correlation Coefficient

Almirall  Pharma Mar

Poor diversification

The 3 months correlation between Almirall and Pharma is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Almirall SA and Pharma Mar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Mar SA and Almirall 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 Almirall SA are associated (or correlated) with Pharma Mar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Mar SA has no effect on the direction of Almirall i.e., Almirall and Pharma Mar go up and down completely randomly.

Pair Corralation between Almirall and Pharma Mar

Assuming the 90 days trading horizon Almirall SA is expected to generate 0.59 times more return on investment than Pharma Mar. However, Almirall SA is 1.69 times less risky than Pharma Mar. It trades about 0.22 of its potential returns per unit of risk. Pharma Mar SA is currently generating about 0.06 per unit of risk. If you would invest  808.00  in Almirall SA on December 30, 2024 and sell it today you would earn a total of  199.00  from holding Almirall SA or generate 24.63% return on investment over 90 days.

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

Almirall SA  vs.  Pharma Mar SA

Almirall SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Almirall SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Almirall exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pharma Mar SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Pharma Mar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Almirall and Pharma Mar

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

The idea behind Almirall SA and Pharma Mar SA 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.