Correlation Between CSL and Pharma Mar

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

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

Diversification Opportunities for CSL and Pharma Mar

-0.77

Correlation Coefficient

CSL  Pharma Mar

Pay attention - limited upside

The 3 months correlation between CSL and Pharma is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Pharma Mar SAU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Mar SAU and CSL 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 CSL 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 SAU has no effect on the direction of CSL i.e., CSL and Pharma Mar go up and down completely randomly.

Pair Corralation between CSL and Pharma Mar

Assuming the 90 days horizon CSL is expected to under-perform the Pharma Mar. But the pink sheet apears to be less risky and, when comparing its historical volatility, CSL is 4.55 times less risky than Pharma Mar. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Pharma Mar SAU is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,490  in Pharma Mar SAU on September 5, 2024 and sell it today you would earn a total of  3,010  from holding Pharma Mar SAU or generate 67.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CSL  vs.  Pharma Mar SAU

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pharma Mar SAU

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SAU are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Pharma Mar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSL and Pharma Mar

The main advantage of trading using opposite CSL and Pharma Mar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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 CSL and Pharma Mar SAU 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.