Correlation Between Pharma Mar and Almirall

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

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

Diversification Opportunities for Pharma Mar and Almirall

0.01

Correlation Coefficient

Pharma Mar  Almirall

Significant diversification

The 3 months correlation between Pharma and Almirall is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pharma Mar SA and Almirall SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almirall SA and Pharma Mar 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 Pharma Mar SA are associated (or correlated) with Almirall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almirall SA has no effect on the direction of Pharma Mar i.e., Pharma Mar and Almirall go up and down completely randomly.

Pair Corralation between Pharma Mar and Almirall

Assuming the 90 days trading horizon Pharma Mar SA is expected to generate 3.52 times more return on investment than Almirall. However, Pharma Mar is 3.52 times more volatile than Almirall SA. It trades about 0.23 of its potential returns per unit of risk. Almirall SA is currently generating about 0.0 per unit of risk. If you would invest  4,164  in Pharma Mar SA on September 2, 2024 and sell it today you would earn a total of  3,646  from holding Pharma Mar SA or generate 87.56% return on investment over 90 days.

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

Pharma Mar SA  vs.  Almirall SA

Pharma Mar SA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Pharma Mar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Almirall SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almirall SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Almirall is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pharma Mar and Almirall

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

The idea behind Pharma Mar SA and Almirall 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..