Correlation Between Mapfre and Pharma Mar

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

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

Diversification Opportunities for Mapfre and Pharma Mar

0.51

Correlation Coefficient

Mapfre  Pharma Mar

Very weak diversification

The 3 months correlation between Mapfre and Pharma is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mapfre 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 Mapfre 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 Mapfre 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 Mapfre i.e., Mapfre and Pharma Mar go up and down completely randomly.

Pair Corralation between Mapfre and Pharma Mar

Assuming the 90 days trading horizon Mapfre is expected to generate 0.5 times more return on investment than Pharma Mar. However, Mapfre is 1.98 times less risky than Pharma Mar. It trades about 0.19 of its potential returns per unit of risk. Pharma Mar SA is currently generating about 0.06 per unit of risk. If you would invest  244.00  in Mapfre on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Mapfre or generate 17.21% return on investment over 90 days.

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

Mapfre  vs.  Pharma Mar SA

Mapfre

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mapfre exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pharma Mar SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Pharma Mar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mapfre and Pharma Mar

The main advantage of trading using opposite Mapfre and Pharma Mar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mapfre 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 Mapfre 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.