Correlation Between Pharma Mar and Mapfre

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

Diversification Opportunities for Pharma Mar and Mapfre

0.76

Correlation Coefficient

Pharma Mar  Mapfre

Poor diversification

The 3 months correlation between Pharma and Mapfre is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pharma Mar SA and Mapfre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre 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 Mapfre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre has no effect on the direction of Pharma Mar i.e., Pharma Mar and Mapfre go up and down completely randomly.

Pair Corralation between Pharma Mar and Mapfre

Assuming the 90 days trading horizon Pharma Mar SA is expected to generate 1.63 times more return on investment than Mapfre. However, Pharma Mar is 1.63 times more volatile than Mapfre. It trades about 0.19 of its potential returns per unit of risk. Mapfre is currently generating about 0.15 per unit of risk. If you would invest  8,005  in Pharma Mar SA on December 2, 2024 and sell it today you would earn a total of  1,575  from holding Pharma Mar SA or generate 19.68% return on investment over 90 days.

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

Pharma Mar SA  vs.  Mapfre

Pharma Mar SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 9 (%) 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.

Mapfre

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mapfre may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pharma Mar and Mapfre

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

The idea behind Pharma Mar SA and Mapfre 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.