Correlation Between Faes Farma and Miquel Y

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

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

Diversification Opportunities for Faes Farma and Miquel Y

-0.48

Correlation Coefficient

Faes Farma  Miquel Y

Very good diversification

The 3 months correlation between Faes and Miquel is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Faes Farma SA and Miquel y Costas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miquel y Costas and Faes Farma 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 Faes Farma SA are associated (or correlated) with Miquel Y. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miquel y Costas has no effect on the direction of Faes Farma i.e., Faes Farma and Miquel Y go up and down completely randomly.

Pair Corralation between Faes Farma and Miquel Y

Assuming the 90 days trading horizon Faes Farma SA is expected to under-perform the Miquel Y. But the stock apears to be less risky and, when comparing its historical volatility, Faes Farma SA is 1.9 times less risky than Miquel Y. The stock trades about -0.13 of its potential returns per unit of risk. The Miquel y Costas is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,211  in Miquel y Costas on September 12, 2024 and sell it today you would earn a total of  49.00  from holding Miquel y Costas or generate 4.05% return on investment over 90 days.

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

Faes Farma SA  vs.  Miquel y Costas

Faes Farma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faes Farma SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Miquel y Costas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Miquel y Costas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Miquel Y is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Faes Farma and Miquel Y

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

The idea behind Faes Farma SA and Miquel y Costas 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.