Correlation Between Remarul 16 and Farmaceutica

Can any of the company-specific risk be diversified away by investing in both Remarul 16 and Farmaceutica 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 Remarul 16 and Farmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Remarul 16 Februarie and Farmaceutica R, you can compare the effects of market volatilities on Remarul 16 and Farmaceutica 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 Remarul 16 with a short position of Farmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Remarul 16 and Farmaceutica.

Diversification Opportunities for Remarul 16 and Farmaceutica

0.69

Correlation Coefficient

Remarul 16  Farmaceutica

Poor diversification

The 3 months correlation between Remarul and Farmaceutica is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Remarul 16 Februarie and Farmaceutica R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmaceutica R and Remarul 16 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 Remarul 16 Februarie are associated (or correlated) with Farmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmaceutica R has no effect on the direction of Remarul 16 i.e., Remarul 16 and Farmaceutica go up and down completely randomly.

Pair Corralation between Remarul 16 and Farmaceutica

Assuming the 90 days trading horizon Remarul 16 Februarie is expected to under-perform the Farmaceutica. But the stock apears to be less risky and, when comparing its historical volatility, Remarul 16 Februarie is 2.99 times less risky than Farmaceutica. The stock trades about -0.17 of its potential returns per unit of risk. The Farmaceutica R is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Farmaceutica R on December 1, 2024 and sell it today you would lose (2.00) from holding Farmaceutica R or give up 3.08% of portfolio value over 90 days.

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

Remarul 16 Februarie  vs.  Farmaceutica R

Remarul 16 Februarie

Risk-Adjusted Performance

Very Weak

Over the last 90 days Remarul 16 Februarie has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Farmaceutica R

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Remarul 16 and Farmaceutica

The main advantage of trading using opposite Remarul 16 and Farmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Remarul 16 position performs unexpectedly, Farmaceutica 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 Farmaceutica will offset losses from the drop in Farmaceutica's long position.

The idea behind Remarul 16 Februarie and Farmaceutica R 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.