Correlation Between Cia De and Faes Farma

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

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

Diversification Opportunities for Cia De and Faes Farma

-0.86

Correlation Coefficient

Cia De  Faes Farma

Pay attention - limited upside

The 3 months correlation between Cia and Faes is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cia de Distribucion 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 Cia De 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 Cia de Distribucion 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 Cia De i.e., Cia De and Faes Farma go up and down completely randomly.

Pair Corralation between Cia De and Faes Farma

Assuming the 90 days trading horizon Cia de Distribucion is expected to generate 0.93 times more return on investment than Faes Farma. However, Cia de Distribucion is 1.08 times less risky than Faes Farma. It trades about 0.11 of its potential returns per unit of risk. Faes Farma SA is currently generating about -0.14 per unit of risk. If you would invest  2,794  in Cia de Distribucion on September 13, 2024 and sell it today you would earn a total of  150.00  from holding Cia de Distribucion or generate 5.37% return on investment over 90 days.

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

Cia de Distribucion  vs.  Faes Farma SA

Cia de Distribucion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cia de Distribucion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cia De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the 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 Cia De and Faes Farma

The main advantage of trading using opposite Cia De and Faes Farma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cia De 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 Cia de Distribucion 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.