Correlation Between Bryn Resources and Rafarma Pharmaceuticals

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

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

Diversification Opportunities for Bryn Resources and Rafarma Pharmaceuticals

-0.61

Correlation Coefficient

Bryn Resources  Rafarma Pharmaceuticals

Excellent diversification

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

Pair Corralation between Bryn Resources and Rafarma Pharmaceuticals

Given the investment horizon of 90 days Bryn Resources is expected to generate 9.03 times more return on investment than Rafarma Pharmaceuticals. However, Bryn Resources is 9.03 times more volatile than Rafarma Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. Rafarma Pharmaceuticals is currently generating about 0.12 per unit of risk. If you would invest  0.81  in Bryn Resources on September 17, 2024 and sell it today you would lose (0.60) from holding Bryn Resources or give up 74.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Bryn Resources  vs.  Rafarma Pharmaceuticals

Bryn Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bryn Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bryn Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Rafarma Pharmaceuticals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rafarma Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, Rafarma Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bryn Resources and Rafarma Pharmaceuticals

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

The idea behind Bryn Resources and Rafarma 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.