Correlation Between Basilea Pharmaceutica and Newron Pharmaceuticals

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

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

Diversification Opportunities for Basilea Pharmaceutica and Newron Pharmaceuticals

0.34

Correlation Coefficient

Basilea Pharmaceutica  Newron Pharmaceuticals

Weak diversification

The 3 months correlation between Basilea and Newron is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Basilea Pharmaceutica AG and Newron Pharmaceuticals SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newron Pharmaceuticals and Basilea Pharmaceutica 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 Basilea Pharmaceutica AG are associated (or correlated) with Newron Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newron Pharmaceuticals has no effect on the direction of Basilea Pharmaceutica i.e., Basilea Pharmaceutica and Newron Pharmaceuticals go up and down completely randomly.

Pair Corralation between Basilea Pharmaceutica and Newron Pharmaceuticals

Assuming the 90 days trading horizon Basilea Pharmaceutica is expected to generate 1.71 times less return on investment than Newron Pharmaceuticals. But when comparing it to its historical volatility, Basilea Pharmaceutica AG is 2.22 times less risky than Newron Pharmaceuticals. It trades about 0.18 of its potential returns per unit of risk. Newron Pharmaceuticals SpA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  745.00  in Newron Pharmaceuticals SpA on December 4, 2024 and sell it today you would earn a total of  227.00  from holding Newron Pharmaceuticals SpA or generate 30.47% return on investment over 90 days.

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

Basilea Pharmaceutica AG  vs.  Newron Pharmaceuticals SpA

Basilea Pharmaceutica

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Basilea Pharmaceutica AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Basilea Pharmaceutica showed solid returns over the last few months and may actually be approaching a breakup point.

Newron Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newron Pharmaceuticals SpA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newron Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Basilea Pharmaceutica and Newron Pharmaceuticals

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

The idea behind Basilea Pharmaceutica AG and Newron Pharmaceuticals SpA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.