Correlation Between CEZ As and Medicofarma Biotech

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

By analyzing existing cross correlation between CEZ as and Medicofarma Biotech SA, you can compare the effects of market volatilities on CEZ As and Medicofarma Biotech 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 CEZ As with a short position of Medicofarma Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ As and Medicofarma Biotech.

Diversification Opportunities for CEZ As and Medicofarma Biotech

-0.81

Correlation Coefficient

CEZ As  Medicofarma Biotech

Pay attention - limited upside

The 3 months correlation between CEZ and Medicofarma is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Medicofarma Biotech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicofarma Biotech and CEZ As 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 CEZ as are associated (or correlated) with Medicofarma Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicofarma Biotech has no effect on the direction of CEZ As i.e., CEZ As and Medicofarma Biotech go up and down completely randomly.

Pair Corralation between CEZ As and Medicofarma Biotech

Assuming the 90 days trading horizon CEZ as is expected to generate 0.4 times more return on investment than Medicofarma Biotech. However, CEZ as is 2.52 times less risky than Medicofarma Biotech. It trades about 0.1 of its potential returns per unit of risk. Medicofarma Biotech SA is currently generating about -0.09 per unit of risk. If you would invest  14,600  in CEZ as on September 24, 2024 and sell it today you would earn a total of  1,700  from holding CEZ as or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

CEZ as  vs.  Medicofarma Biotech SA

CEZ as

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CEZ As may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Medicofarma Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicofarma Biotech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with CEZ As and Medicofarma Biotech

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

The idea behind CEZ as and Medicofarma Biotech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.