Correlation Between BEXIMCO PHARMAGDR and Dermapharm Holding

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

By analyzing existing cross correlation between BEXIMCO PHARMAGDR REGS and Dermapharm Holding SE, you can compare the effects of market volatilities on BEXIMCO PHARMAGDR and Dermapharm Holding 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 BEXIMCO PHARMAGDR with a short position of Dermapharm Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of BEXIMCO PHARMAGDR and Dermapharm Holding.

Diversification Opportunities for BEXIMCO PHARMAGDR and Dermapharm Holding

0.85

Correlation Coefficient

BEXIMCO PHARMAGDR  Dermapharm Holding

Very poor diversification

The 3 months correlation between BEXIMCO and Dermapharm is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BEXIMCO PHARMAGDR REGS and Dermapharm Holding SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermapharm Holding and BEXIMCO PHARMAGDR 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 BEXIMCO PHARMAGDR REGS are associated (or correlated) with Dermapharm Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermapharm Holding has no effect on the direction of BEXIMCO PHARMAGDR i.e., BEXIMCO PHARMAGDR and Dermapharm Holding go up and down completely randomly.

Pair Corralation between BEXIMCO PHARMAGDR and Dermapharm Holding

Assuming the 90 days trading horizon BEXIMCO PHARMAGDR REGS is expected to generate 1.29 times more return on investment than Dermapharm Holding. However, BEXIMCO PHARMAGDR is 1.29 times more volatile than Dermapharm Holding SE. It trades about 0.19 of its potential returns per unit of risk. Dermapharm Holding SE is currently generating about 0.23 per unit of risk. If you would invest  42.00  in BEXIMCO PHARMAGDR REGS on October 15, 2024 and sell it today you would earn a total of  3.00  from holding BEXIMCO PHARMAGDR REGS or generate 7.14% return on investment over 90 days.

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

BEXIMCO PHARMAGDR REGS  vs.  Dermapharm Holding SE

BEXIMCO PHARMAGDR REGS

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BEXIMCO PHARMAGDR REGS are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BEXIMCO PHARMAGDR reported solid returns over the last few months and may actually be approaching a breakup point.

Dermapharm Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dermapharm Holding SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Dermapharm Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BEXIMCO PHARMAGDR and Dermapharm Holding

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

The idea behind BEXIMCO PHARMAGDR REGS and Dermapharm Holding SE 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.