Correlation Between Farmaceutica and Oil Terminal

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

By analyzing existing cross correlation between Farmaceutica R and Oil Terminal C, you can compare the effects of market volatilities on Farmaceutica and Oil Terminal 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 Oil Terminal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmaceutica and Oil Terminal.

Diversification Opportunities for Farmaceutica and Oil Terminal

0.12

Correlation Coefficient

Farmaceutica  Oil Terminal

Average diversification

The 3 months correlation between Farmaceutica and Oil is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Farmaceutica R and Oil Terminal C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Terminal C 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 Oil Terminal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Terminal C has no effect on the direction of Farmaceutica i.e., Farmaceutica and Oil Terminal go up and down completely randomly.

Pair Corralation between Farmaceutica and Oil Terminal

Assuming the 90 days trading horizon Farmaceutica R is expected to generate 0.95 times more return on investment than Oil Terminal. However, Farmaceutica R is 1.05 times less risky than Oil Terminal. It trades about 0.07 of its potential returns per unit of risk. Oil Terminal C is currently generating about 0.01 per unit of risk. If you would invest  65.00  in Farmaceutica R on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Farmaceutica R or generate 3.08% return on investment over 90 days.

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

Farmaceutica R  vs.  Oil Terminal C

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 latest unfluctuating 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.

Oil Terminal C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Terminal C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Oil Terminal 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 Oil Terminal

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

The idea behind Farmaceutica R and Oil Terminal C 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.