Correlation Between Medicofarma Biotech and Datawalk

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

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

Diversification Opportunities for Medicofarma Biotech and Datawalk

-0.52

Correlation Coefficient

Medicofarma Biotech  Datawalk

Excellent diversification

The 3 months correlation between Medicofarma and Datawalk is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Medicofarma Biotech SA and Datawalk SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datawalk SA and Medicofarma Biotech 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 Medicofarma Biotech SA are associated (or correlated) with Datawalk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datawalk SA has no effect on the direction of Medicofarma Biotech i.e., Medicofarma Biotech and Datawalk go up and down completely randomly.

Pair Corralation between Medicofarma Biotech and Datawalk

Assuming the 90 days trading horizon Medicofarma Biotech SA is expected to under-perform the Datawalk. But the stock apears to be less risky and, when comparing its historical volatility, Medicofarma Biotech SA is 1.18 times less risky than Datawalk. The stock trades about -0.1 of its potential returns per unit of risk. The Datawalk SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,200  in Datawalk SA on September 18, 2024 and sell it today you would earn a total of  680.00  from holding Datawalk SA or generate 16.19% return on investment over 90 days.

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

Medicofarma Biotech SA  vs.  Datawalk SA

Medicofarma Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicofarma Biotech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Datawalk SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Datawalk SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Datawalk reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medicofarma Biotech and Datawalk

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

The idea behind Medicofarma Biotech SA and Datawalk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.