Correlation Between Almirall and Vidrala SA

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

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

Diversification Opportunities for Almirall and Vidrala SA

-0.28

Correlation Coefficient

Almirall  Vidrala SA

Very good diversification

The 3 months correlation between Almirall and Vidrala is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Almirall SA and Vidrala SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vidrala SA and Almirall 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 Almirall SA are associated (or correlated) with Vidrala SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vidrala SA has no effect on the direction of Almirall i.e., Almirall and Vidrala SA go up and down completely randomly.

Pair Corralation between Almirall and Vidrala SA

Assuming the 90 days trading horizon Almirall SA is expected to under-perform the Vidrala SA. But the stock apears to be less risky and, when comparing its historical volatility, Almirall SA is 1.29 times less risky than Vidrala SA. The stock trades about -0.02 of its potential returns per unit of risk. The Vidrala SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,248  in Vidrala SA on September 15, 2024 and sell it today you would earn a total of  272.00  from holding Vidrala SA or generate 2.94% return on investment over 90 days.

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

Almirall SA  vs.  Vidrala SA

Almirall SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almirall SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Almirall is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vidrala SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vidrala SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Vidrala SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Almirall and Vidrala SA

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

The idea behind Almirall SA and Vidrala 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.