Correlation Between Fomento De and Pharma Mar

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

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

Diversification Opportunities for Fomento De and Pharma Mar

0.73

Correlation Coefficient

Fomento De  Pharma Mar

Poor diversification

The 3 months correlation between Fomento and Pharma is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fomento de Construcciones and Pharma Mar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Mar SA and Fomento De 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 Fomento de Construcciones are associated (or correlated) with Pharma Mar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Mar SA has no effect on the direction of Fomento De i.e., Fomento De and Pharma Mar go up and down completely randomly.

Pair Corralation between Fomento De and Pharma Mar

Assuming the 90 days trading horizon Fomento de Construcciones is expected to generate 0.55 times more return on investment than Pharma Mar. However, Fomento de Construcciones is 1.81 times less risky than Pharma Mar. It trades about 0.14 of its potential returns per unit of risk. Pharma Mar SA is currently generating about 0.0 per unit of risk. If you would invest  1,015  in Fomento de Construcciones on April 24, 2025 and sell it today you would earn a total of  149.00  from holding Fomento de Construcciones or generate 14.68% return on investment over 90 days.

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

Fomento de Construcciones  vs.  Pharma Mar SA

Fomento de Construcciones

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento de Construcciones are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Fomento De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pharma Mar SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fomento De and Pharma Mar

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

The idea behind Fomento de Construcciones and Pharma Mar 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.