Correlation Between Galenica Sante and Basilea Pharmaceutica

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

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

Diversification Opportunities for Galenica Sante and Basilea Pharmaceutica

-0.58

Correlation Coefficient

Galenica Sante  Basilea Pharmaceutica

Excellent diversification

The 3 months correlation between Galenica and Basilea is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Galenica Sante AG and Basilea Pharmaceutica AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basilea Pharmaceutica and Galenica Sante 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 Galenica Sante AG 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 Galenica Sante i.e., Galenica Sante and Basilea Pharmaceutica go up and down completely randomly.

Pair Corralation between Galenica Sante and Basilea Pharmaceutica

Assuming the 90 days trading horizon Galenica Sante AG is expected to under-perform the Basilea Pharmaceutica. But the stock apears to be less risky and, when comparing its historical volatility, Galenica Sante AG is 1.87 times less risky than Basilea Pharmaceutica. The stock trades about -0.03 of its potential returns per unit of risk. The Basilea Pharmaceutica AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,120  in Basilea Pharmaceutica AG on September 13, 2024 and sell it today you would lose (10.00) from holding Basilea Pharmaceutica AG or give up 0.24% of portfolio value over 90 days.

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

Galenica Sante AG  vs.  Basilea Pharmaceutica AG

Galenica Sante AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galenica Sante AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Galenica Sante is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Basilea Pharmaceutica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basilea Pharmaceutica AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Galenica Sante and Basilea Pharmaceutica

The main advantage of trading using opposite Galenica Sante and Basilea Pharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galenica Sante 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 Galenica Sante AG 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.