Correlation Between Pharma Mar and Grifols SA

Can any of the company-specific risk be diversified away by investing in both Pharma Mar and Grifols 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 Pharma Mar and Grifols SA 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 Grifols SA, you can compare the effects of market volatilities on Pharma Mar and Grifols 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 Pharma Mar with a short position of Grifols SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharma Mar and Grifols SA.

Diversification Opportunities for Pharma Mar and Grifols SA

0.36

Correlation Coefficient

Pharma Mar  Grifols SA

Weak diversification

The 3 months correlation between Pharma and Grifols is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pharma Mar SA and Grifols SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grifols 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 Grifols SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grifols SA has no effect on the direction of Pharma Mar i.e., Pharma Mar and Grifols SA go up and down completely randomly.

Pair Corralation between Pharma Mar and Grifols SA

Assuming the 90 days trading horizon Pharma Mar SA is expected to generate 1.02 times more return on investment than Grifols SA. However, Pharma Mar is 1.02 times more volatile than Grifols SA. It trades about 0.06 of its potential returns per unit of risk. Grifols SA is currently generating about -0.03 per unit of risk. If you would invest  7,690  in Pharma Mar SA on December 30, 2024 and sell it today you would earn a total of  630.00  from holding Pharma Mar SA or generate 8.19% return on investment over 90 days.

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

Pharma Mar SA  vs.  Grifols SA

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.

Grifols SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grifols SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Grifols SA 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 Grifols SA

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

The idea behind Pharma Mar SA and Grifols 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.