Correlation Between Procaps Group and Raphael Pharmaceutical

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

Diversification Opportunities for Procaps Group and Raphael Pharmaceutical

0.65

Correlation Coefficient

Procaps Group  Raphael Pharmaceutical

Poor diversification

The 3 months correlation between Procaps and Raphael is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Procaps Group SA and Raphael Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raphael Pharmaceutical 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 Raphael Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raphael Pharmaceutical has no effect on the direction of Procaps Group i.e., Procaps Group and Raphael Pharmaceutical go up and down completely randomly.

Pair Corralation between Procaps Group and Raphael Pharmaceutical

Given the investment horizon of 90 days Procaps Group SA is expected to generate 1.61 times more return on investment than Raphael Pharmaceutical. However, Procaps Group is 1.61 times more volatile than Raphael Pharmaceutical. It trades about 0.06 of its potential returns per unit of risk. Raphael Pharmaceutical is currently generating about -0.13 per unit of risk. If you would invest  183.00  in Procaps Group SA on September 4, 2024 and sell it today you would lose (20.00) from holding Procaps Group SA or give up 10.93% of portfolio value over 90 days.

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

Procaps Group SA  vs.  Raphael Pharmaceutical

Procaps Group SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procaps Group SA are ranked lower than 4 (%) 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.

Raphael Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raphael Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Procaps Group and Raphael Pharmaceutical

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

The idea behind Procaps Group SA and Raphael Pharmaceutical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.