Correlation Between Viscofan and Faes Farma

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

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

Diversification Opportunities for Viscofan and Faes Farma

0.25

Correlation Coefficient

Viscofan  Faes Farma

Modest diversification

The 3 months correlation between Viscofan and Faes is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Viscofan and Faes Farma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faes Farma SA and Viscofan 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 Viscofan are associated (or correlated) with Faes Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faes Farma SA has no effect on the direction of Viscofan i.e., Viscofan and Faes Farma go up and down completely randomly.

Pair Corralation between Viscofan and Faes Farma

Assuming the 90 days trading horizon Viscofan is expected to generate 2.66 times less return on investment than Faes Farma. But when comparing it to its historical volatility, Viscofan is 2.31 times less risky than Faes Farma. It trades about 0.12 of its potential returns per unit of risk. Faes Farma SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  342.00  in Faes Farma SA on December 29, 2024 and sell it today you would earn a total of  58.00  from holding Faes Farma SA or generate 16.96% return on investment over 90 days.

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

Viscofan  vs.  Faes Farma SA

Viscofan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viscofan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Viscofan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Faes Farma SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faes Farma SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Faes Farma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viscofan and Faes Farma

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

The idea behind Viscofan and Faes Farma 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.