Correlation Between COSMO Pharmaceuticals and Basilea Pharmaceutica
Can any of the company-specific risk be diversified away by investing in both COSMO Pharmaceuticals and Basilea Pharmaceutica 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 COSMO Pharmaceuticals and Basilea Pharmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSMO Pharmaceuticals SA and Basilea Pharmaceutica AG, you can compare the effects of market volatilities on COSMO Pharmaceuticals and Basilea Pharmaceutica 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 COSMO Pharmaceuticals with a short position of Basilea Pharmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO Pharmaceuticals and Basilea Pharmaceutica.
Diversification Opportunities for COSMO Pharmaceuticals and Basilea Pharmaceutica
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between COSMO and Basilea is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding COSMO Pharmaceuticals SA and Basilea Pharmaceutica AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basilea Pharmaceutica and COSMO Pharmaceuticals 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 COSMO Pharmaceuticals SA are associated (or correlated) with Basilea Pharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basilea Pharmaceutica has no effect on the direction of COSMO Pharmaceuticals i.e., COSMO Pharmaceuticals and Basilea Pharmaceutica go up and down completely randomly.
Pair Corralation between COSMO Pharmaceuticals and Basilea Pharmaceutica
Assuming the 90 days trading horizon COSMO Pharmaceuticals SA is expected to under-perform the Basilea Pharmaceutica. But the stock apears to be less risky and, when comparing its historical volatility, COSMO Pharmaceuticals SA is 1.1 times less risky than Basilea Pharmaceutica. The stock trades about -0.39 of its potential returns per unit of risk. The Basilea Pharmaceutica AG is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest 4,455 in Basilea Pharmaceutica AG on August 28, 2024 and sell it today you would lose (395.00) from holding Basilea Pharmaceutica AG or give up 8.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSMO Pharmaceuticals SA vs. Basilea Pharmaceutica AG
Performance |
| Timeline |
| COSMO Pharmaceuticals |
| Basilea Pharmaceutica |
COSMO Pharmaceuticals and Basilea Pharmaceutica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSMO Pharmaceuticals and Basilea Pharmaceutica
The main advantage of trading using opposite COSMO Pharmaceuticals and Basilea Pharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSMO Pharmaceuticals position performs unexpectedly, Basilea Pharmaceutica 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 Basilea Pharmaceutica will offset losses from the drop in Basilea Pharmaceutica's long position.The idea behind COSMO Pharmaceuticals SA and Basilea Pharmaceutica AG 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.
| Basilea Pharmaceutica vs. Santhera Pharmaceuticals Holding | Basilea Pharmaceutica vs. Idorsia | Basilea Pharmaceutica vs. Molecular Partners AG | Basilea Pharmaceutica vs. Evolva Holding SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |