Correlation Between Medicofarma Biotech and Santander Bank

Can any of the company-specific risk be diversified away by investing in both Medicofarma Biotech and Santander Bank 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 Santander Bank 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 Santander Bank Polska, you can compare the effects of market volatilities on Medicofarma Biotech and Santander Bank 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 Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medicofarma Biotech and Santander Bank.

Diversification Opportunities for Medicofarma Biotech and Santander Bank

0.29

Correlation Coefficient

Medicofarma Biotech  Santander Bank

Modest diversification

The 3 months correlation between Medicofarma and Santander is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Medicofarma Biotech SA and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska 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 Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Medicofarma Biotech i.e., Medicofarma Biotech and Santander Bank go up and down completely randomly.

Pair Corralation between Medicofarma Biotech and Santander Bank

Assuming the 90 days trading horizon Medicofarma Biotech SA is expected to under-perform the Santander Bank. In addition to that, Medicofarma Biotech is 2.19 times more volatile than Santander Bank Polska. It trades about -0.09 of its total potential returns per unit of risk. Santander Bank Polska is currently generating about 0.03 per unit of volatility. If you would invest  46,360  in Santander Bank Polska on September 12, 2024 and sell it today you would earn a total of  1,410  from holding Santander Bank Polska or generate 3.04% return on investment over 90 days.

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

Medicofarma Biotech SA  vs.  Santander Bank Polska

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.

Santander Bank Polska

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Santander Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Medicofarma Biotech and Santander Bank

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

The idea behind Medicofarma Biotech SA and Santander Bank Polska 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.