Correlation Between Promateris and Biofarm Bucure

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

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

Diversification Opportunities for Promateris and Biofarm Bucure

0.43

Correlation Coefficient

Promateris  Biofarm Bucure

Very weak diversification

The 3 months correlation between Promateris and Biofarm is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Promateris SA and Biofarm Bucure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofarm Bucure and Promateris 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 Promateris SA are associated (or correlated) with Biofarm Bucure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofarm Bucure has no effect on the direction of Promateris i.e., Promateris and Biofarm Bucure go up and down completely randomly.

Pair Corralation between Promateris and Biofarm Bucure

Assuming the 90 days trading horizon Promateris SA is expected to generate 4.96 times more return on investment than Biofarm Bucure. However, Promateris is 4.96 times more volatile than Biofarm Bucure. It trades about -0.01 of its potential returns per unit of risk. Biofarm Bucure is currently generating about -0.08 per unit of risk. If you would invest  780.00  in Promateris SA on September 16, 2024 and sell it today you would lose (110.00) from holding Promateris SA or give up 14.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Promateris SA  vs.  Biofarm Bucure

Promateris SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promateris SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Promateris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Biofarm Bucure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biofarm Bucure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Biofarm Bucure is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Promateris and Biofarm Bucure

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

The idea behind Promateris SA and Biofarm Bucure 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.