Correlation Between Biotechnology Assets and Pharma Mar

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

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

Diversification Opportunities for Biotechnology Assets and Pharma Mar

-0.24

Correlation Coefficient

Biotechnology Assets  Pharma Mar

Very good diversification

The 3 months correlation between Biotechnology and Pharma is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Assets 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 Biotechnology Assets 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 Biotechnology Assets 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 Biotechnology Assets i.e., Biotechnology Assets and Pharma Mar go up and down completely randomly.

Pair Corralation between Biotechnology Assets and Pharma Mar

Assuming the 90 days trading horizon Biotechnology Assets is expected to generate 8.3 times less return on investment than Pharma Mar. In addition to that, Biotechnology Assets is 1.25 times more volatile than Pharma Mar SA. It trades about 0.02 of its total potential returns per unit of risk. Pharma Mar SA is currently generating about 0.25 per unit of volatility. If you would invest  4,120  in Pharma Mar SA on September 4, 2024 and sell it today you would earn a total of  3,880  from holding Pharma Mar SA or generate 94.17% return on investment over 90 days.

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

Biotechnology Assets SA  vs.  Pharma Mar SA

Biotechnology Assets

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biotechnology Assets SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Biotechnology Assets may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pharma Mar SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Pharma Mar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotechnology Assets and Pharma Mar

The main advantage of trading using opposite Biotechnology Assets and Pharma Mar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Assets 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 Biotechnology Assets 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.