Correlation Between Laboratorios Farmaceuticos and Pharma Mar

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

By analyzing existing cross correlation between Laboratorios Farmaceuticos ROVI and Pharma Mar SA, you can compare the effects of market volatilities on Laboratorios Farmaceuticos and Pharma Mar 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 Laboratorios Farmaceuticos with a short position of Pharma Mar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laboratorios Farmaceuticos and Pharma Mar.

Diversification Opportunities for Laboratorios Farmaceuticos and Pharma Mar

-0.66

Correlation Coefficient

Laboratorios Farmaceuticos  Pharma Mar

Excellent diversification

The 3 months correlation between Laboratorios and Pharma is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Laboratorios Farmaceuticos ROV and Pharma Mar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Mar SA and Laboratorios Farmaceuticos 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 Laboratorios Farmaceuticos ROVI are associated (or correlated) with Pharma Mar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Mar SA has no effect on the direction of Laboratorios Farmaceuticos i.e., Laboratorios Farmaceuticos and Pharma Mar go up and down completely randomly.

Pair Corralation between Laboratorios Farmaceuticos and Pharma Mar

Assuming the 90 days trading horizon Laboratorios Farmaceuticos ROVI is expected to under-perform the Pharma Mar. But the stock apears to be less risky and, when comparing its historical volatility, Laboratorios Farmaceuticos ROVI is 1.11 times less risky than Pharma Mar. The stock trades about -0.1 of its potential returns per unit of risk. The Pharma Mar SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,000  in Pharma Mar SA on December 2, 2024 and sell it today you would earn a total of  1,580  from holding Pharma Mar SA or generate 19.75% return on investment over 90 days.

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

Laboratorios Farmaceuticos ROV  vs.  Pharma Mar SA

Laboratorios Farmaceuticos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laboratorios Farmaceuticos ROVI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pharma Mar SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Pharma Mar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laboratorios Farmaceuticos and Pharma Mar

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

The idea behind Laboratorios Farmaceuticos ROVI and Pharma Mar SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..