Correlation Between Procaps Group and Eton Pharmaceuticals

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

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

Diversification Opportunities for Procaps Group and Eton Pharmaceuticals

0.16

Correlation Coefficient

Procaps Group  Eton Pharmaceuticals

Average diversification

The 3 months correlation between Procaps and Eton is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Procaps Group SA and Eton Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eton Pharmaceuticals and Procaps Group 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 Procaps Group SA are associated (or correlated) with Eton Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eton Pharmaceuticals has no effect on the direction of Procaps Group i.e., Procaps Group and Eton Pharmaceuticals go up and down completely randomly.

Pair Corralation between Procaps Group and Eton Pharmaceuticals

Given the investment horizon of 90 days Procaps Group SA is expected to under-perform the Eton Pharmaceuticals. In addition to that, Procaps Group is 2.79 times more volatile than Eton Pharmaceuticals. It trades about -0.01 of its total potential returns per unit of risk. Eton Pharmaceuticals is currently generating about 0.01 per unit of volatility. If you would invest  1,227  in Eton Pharmaceuticals on October 9, 2024 and sell it today you would lose (11.00) from holding Eton Pharmaceuticals or give up 0.9% of portfolio value over 90 days.

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

Procaps Group SA  vs.  Eton Pharmaceuticals

Procaps Group SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Procaps Group SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Procaps Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Eton Pharmaceuticals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eton Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procaps Group and Eton Pharmaceuticals

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

The idea behind Procaps Group SA and Eton Pharmaceuticals 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.