Correlation Between Banco Macro and NervGen Pharma

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

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

Diversification Opportunities for Banco Macro and NervGen Pharma

0.58

Correlation Coefficient

Banco Macro  NervGen Pharma

Very weak diversification

The 3 months correlation between Banco and NervGen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and NervGen Pharma Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NervGen Pharma Corp and Banco Macro 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 Banco Macro SA are associated (or correlated) with NervGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NervGen Pharma Corp has no effect on the direction of Banco Macro i.e., Banco Macro and NervGen Pharma go up and down completely randomly.

Pair Corralation between Banco Macro and NervGen Pharma

Considering the 90-day investment horizon Banco Macro SA is expected to generate 0.85 times more return on investment than NervGen Pharma. However, Banco Macro SA is 1.18 times less risky than NervGen Pharma. It trades about 0.11 of its potential returns per unit of risk. NervGen Pharma Corp is currently generating about 0.04 per unit of risk. If you would invest  1,704  in Banco Macro SA on November 20, 2024 and sell it today you would earn a total of  7,513  from holding Banco Macro SA or generate 440.9% return on investment over 90 days.

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

Banco Macro SA  vs.  NervGen Pharma Corp

Banco Macro SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

NervGen Pharma Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NervGen Pharma Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NervGen Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Macro and NervGen Pharma

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

The idea behind Banco Macro SA and NervGen Pharma Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.