Correlation Between Profarma Distribuidora and Biomm SA

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

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

Diversification Opportunities for Profarma Distribuidora and Biomm SA

0.15

Correlation Coefficient

Profarma Distribuidora  Biomm SA

Average diversification

The 3 months correlation between Profarma and Biomm is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Profarma Distribuidora de and Biomm SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomm SA and Profarma Distribuidora 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 Profarma Distribuidora de are associated (or correlated) with Biomm SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomm SA has no effect on the direction of Profarma Distribuidora i.e., Profarma Distribuidora and Biomm SA go up and down completely randomly.

Pair Corralation between Profarma Distribuidora and Biomm SA

Assuming the 90 days trading horizon Profarma Distribuidora is expected to generate 6.17 times less return on investment than Biomm SA. But when comparing it to its historical volatility, Profarma Distribuidora de is 1.52 times less risky than Biomm SA. It trades about 0.06 of its potential returns per unit of risk. Biomm SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  752.00  in Biomm SA on October 20, 2024 and sell it today you would earn a total of  168.00  from holding Biomm SA or generate 22.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Profarma Distribuidora de  vs.  Biomm SA

Profarma Distribuidora

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profarma Distribuidora de are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Profarma Distribuidora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Biomm SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biomm SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Biomm SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Profarma Distribuidora and Biomm SA

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

The idea behind Profarma Distribuidora de and Biomm 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.