Correlation Between Promotora and FibroGen

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

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

Diversification Opportunities for Promotora and FibroGen

-0.38

Correlation Coefficient

Promotora  FibroGen

Very good diversification

The 3 months correlation between Promotora and FibroGen is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Promotora 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 Promotora y Operadora are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Promotora i.e., Promotora and FibroGen go up and down completely randomly.

Pair Corralation between Promotora and FibroGen

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 0.19 times more return on investment than FibroGen. However, Promotora y Operadora is 5.16 times less risky than FibroGen. It trades about 0.14 of its potential returns per unit of risk. FibroGen is currently generating about -0.07 per unit of risk. If you would invest  14,735  in Promotora y Operadora on December 30, 2024 and sell it today you would earn a total of  2,065  from holding Promotora y Operadora or generate 14.01% return on investment over 90 days.

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

Promotora y Operadora  vs.  FibroGen

Promotora y Operadora

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Promotora disclosed solid returns over the last few months and may actually be approaching a breakup point.

FibroGen

Risk-Adjusted Performance

Very Weak

Over the last 90 days FibroGen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Promotora and FibroGen

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

The idea behind Promotora y Operadora and FibroGen 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.