Correlation Between Cellnex Telecom and Pharma Mar

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

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

Diversification Opportunities for Cellnex Telecom and Pharma Mar

-0.73

Correlation Coefficient

Cellnex Telecom  Pharma Mar

Pay attention - limited upside

The 3 months correlation between Cellnex and Pharma is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cellnex Telecom 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 Cellnex Telecom 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 Cellnex Telecom 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 Cellnex Telecom i.e., Cellnex Telecom and Pharma Mar go up and down completely randomly.

Pair Corralation between Cellnex Telecom and Pharma Mar

Assuming the 90 days trading horizon Cellnex Telecom SA is expected to under-perform the Pharma Mar. But the stock apears to be less risky and, when comparing its historical volatility, Cellnex Telecom SA is 3.17 times less risky than Pharma Mar. The stock trades about -0.02 of its potential returns per unit of risk. The Pharma Mar SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,064  in Pharma Mar SA on September 3, 2024 and sell it today you would earn a total of  3,936  from holding Pharma Mar SA or generate 96.85% return on investment over 90 days.

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

Cellnex Telecom SA  vs.  Pharma Mar SA

Cellnex Telecom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cellnex Telecom SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Cellnex Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Cellnex Telecom and Pharma Mar

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

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.