Correlation Between Inmobiliaria Colonial and Faes Farma

Can any of the company-specific risk be diversified away by investing in both Inmobiliaria Colonial and Faes Farma 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 Inmobiliaria Colonial and Faes Farma into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Inmobiliaria Colonial and Faes Farma

0.9

Correlation Coefficient

Inmobiliaria Colonial  Faes Farma

Almost no diversification

The 3 months correlation between Inmobiliaria and Faes is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Inmobiliaria Colonial SA and Faes Farma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faes Farma SA and Inmobiliaria Colonial 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 Inmobiliaria Colonial SA are associated (or correlated) with Faes Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faes Farma SA has no effect on the direction of Inmobiliaria Colonial i.e., Inmobiliaria Colonial and Faes Farma go up and down completely randomly.

Pair Corralation between Inmobiliaria Colonial and Faes Farma

Assuming the 90 days trading horizon Inmobiliaria Colonial SA is expected to under-perform the Faes Farma. In addition to that, Inmobiliaria Colonial is 1.72 times more volatile than Faes Farma SA. It trades about -0.22 of its total potential returns per unit of risk. Faes Farma SA is currently generating about -0.14 per unit of volatility. If you would invest  371.00  in Faes Farma SA on September 13, 2024 and sell it today you would lose (28.00) from holding Faes Farma SA or give up 7.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Inmobiliaria Colonial SA  vs.  Faes Farma SA

Inmobiliaria Colonial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inmobiliaria Colonial SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Faes Farma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faes Farma SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Inmobiliaria Colonial and Faes Farma

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

The idea behind Inmobiliaria Colonial SA and Faes Farma 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.