Correlation Between Farmacias Benavides and Industrias

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

By analyzing existing cross correlation between Farmacias Benavides SAB and Industrias CH S, you can compare the effects of market volatilities on Farmacias Benavides and Industrias 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 Farmacias Benavides with a short position of Industrias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmacias Benavides and Industrias.

Diversification Opportunities for Farmacias Benavides and Industrias

-0.2

Correlation Coefficient

Farmacias Benavides  Industrias

Good diversification

The 3 months correlation between Farmacias and Industrias is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Farmacias Benavides SAB and Industrias CH S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias CH S and Farmacias Benavides 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 Farmacias Benavides SAB are associated (or correlated) with Industrias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias CH S has no effect on the direction of Farmacias Benavides i.e., Farmacias Benavides and Industrias go up and down completely randomly.

Pair Corralation between Farmacias Benavides and Industrias

Assuming the 90 days trading horizon Farmacias Benavides SAB is expected to generate 1.22 times more return on investment than Industrias. However, Farmacias Benavides is 1.22 times more volatile than Industrias CH S. It trades about 0.06 of its potential returns per unit of risk. Industrias CH S is currently generating about -0.02 per unit of risk. If you would invest  1,900  in Farmacias Benavides SAB on September 27, 2024 and sell it today you would earn a total of  300.00  from holding Farmacias Benavides SAB or generate 15.79% return on investment over 90 days.

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

Farmacias Benavides SAB  vs.  Industrias CH S

Farmacias Benavides SAB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmacias Benavides SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Farmacias Benavides may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Industrias CH S

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Farmacias Benavides and Industrias

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

The idea behind Farmacias Benavides SAB and Industrias CH S 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..