Correlation Between Pharma Mar and Renta 4
Can any of the company-specific risk be diversified away by investing in both Pharma Mar and Renta 4 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 Pharma Mar and Renta 4 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pharma Mar SA and Renta 4 Banco, you can compare the effects of market volatilities on Pharma Mar and Renta 4 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 Pharma Mar with a short position of Renta 4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharma Mar and Renta 4.
Diversification Opportunities for Pharma Mar and Renta 4
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pharma and Renta is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pharma Mar SA and Renta 4 Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renta 4 Banco and Pharma Mar 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 Pharma Mar SA are associated (or correlated) with Renta 4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renta 4 Banco has no effect on the direction of Pharma Mar i.e., Pharma Mar and Renta 4 go up and down completely randomly.
Pair Corralation between Pharma Mar and Renta 4
Assuming the 90 days trading horizon Pharma Mar SA is expected to generate 2.08 times more return on investment than Renta 4. However, Pharma Mar is 2.08 times more volatile than Renta 4 Banco. It trades about 0.17 of its potential returns per unit of risk. Renta 4 Banco is currently generating about 0.12 per unit of risk. If you would invest 3,719 in Pharma Mar SA on August 30, 2024 and sell it today you would earn a total of 4,036 from holding Pharma Mar SA or generate 108.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pharma Mar SA vs. Renta 4 Banco
Performance |
| Timeline |
| Pharma Mar SA |
| Renta 4 Banco |
Pharma Mar and Renta 4 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pharma Mar and Renta 4
The main advantage of trading using opposite Pharma Mar and Renta 4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pharma Mar position performs unexpectedly, Renta 4 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 Renta 4 will offset losses from the drop in Renta 4's long position.| Pharma Mar vs. Solaria Energa y | Pharma Mar vs. Grifols SA | Pharma Mar vs. International Consolidated Airlines | Pharma Mar vs. Cellnex Telecom SA |
| Renta 4 vs. Grupo Catalana Occidente | Renta 4 vs. Miquel y Costas | Renta 4 vs. Faes Farma SA | Renta 4 vs. Azkoyen |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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