Correlation Between Farmaceutica and Biofarm Bucure

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

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

Diversification Opportunities for Farmaceutica and Biofarm Bucure

0.85

Correlation Coefficient

Farmaceutica  Biofarm Bucure

Very poor diversification

The 3 months correlation between Farmaceutica and Biofarm is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Farmaceutica R and Biofarm Bucure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofarm Bucure and Farmaceutica 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 Farmaceutica R 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 Farmaceutica i.e., Farmaceutica and Biofarm Bucure go up and down completely randomly.

Pair Corralation between Farmaceutica and Biofarm Bucure

Assuming the 90 days trading horizon Farmaceutica R is expected to under-perform the Biofarm Bucure. In addition to that, Farmaceutica is 2.14 times more volatile than Biofarm Bucure. It trades about -0.1 of its total potential returns per unit of risk. Biofarm Bucure is currently generating about -0.08 per unit of volatility. If you would invest  78.00  in Biofarm Bucure on September 1, 2024 and sell it today you would lose (4.00) from holding Biofarm Bucure or give up 5.13% of portfolio value over 90 days.

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

Farmaceutica R  vs.  Biofarm Bucure

Farmaceutica R

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm 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 Farmaceutica and Biofarm Bucure

The main advantage of trading using opposite Farmaceutica and Biofarm Bucure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmaceutica 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 Farmaceutica R 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.