Correlation Between Medicofarma Biotech and Bank Millennium

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

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

Diversification Opportunities for Medicofarma Biotech and Bank Millennium

-0.47

Correlation Coefficient

Medicofarma Biotech  Bank Millennium

Very good diversification

The 3 months correlation between Medicofarma and Bank is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Medicofarma Biotech SA and Bank Millennium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Millennium SA and Medicofarma Biotech 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 Medicofarma Biotech SA are associated (or correlated) with Bank Millennium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Millennium SA has no effect on the direction of Medicofarma Biotech i.e., Medicofarma Biotech and Bank Millennium go up and down completely randomly.

Pair Corralation between Medicofarma Biotech and Bank Millennium

Assuming the 90 days trading horizon Medicofarma Biotech SA is expected to under-perform the Bank Millennium. In addition to that, Medicofarma Biotech is 1.95 times more volatile than Bank Millennium SA. It trades about -0.02 of its total potential returns per unit of risk. Bank Millennium SA is currently generating about 0.06 per unit of volatility. If you would invest  523.00  in Bank Millennium SA on October 10, 2024 and sell it today you would earn a total of  399.00  from holding Bank Millennium SA or generate 76.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.16%
Values	Daily Returns

Medicofarma Biotech SA  vs.  Bank Millennium SA

Medicofarma Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicofarma Biotech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Bank Millennium SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Millennium SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank Millennium may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Medicofarma Biotech and Bank Millennium

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

The idea behind Medicofarma Biotech SA and Bank Millennium 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.