Correlation Between Awakn Life and Pharming Group

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

By analyzing existing cross correlation between Awakn Life Sciences and Pharming Group NV, you can compare the effects of market volatilities on Awakn Life and Pharming Group 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 Awakn Life with a short position of Pharming Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awakn Life and Pharming Group.

Diversification Opportunities for Awakn Life and Pharming Group

0.33

Correlation Coefficient

Awakn Life  Pharming Group

Weak diversification

The 3 months correlation between Awakn and Pharming is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Awakn Life Sciences and Pharming Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharming Group NV and Awakn Life 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 Awakn Life Sciences are associated (or correlated) with Pharming Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharming Group NV has no effect on the direction of Awakn Life i.e., Awakn Life and Pharming Group go up and down completely randomly.

Pair Corralation between Awakn Life and Pharming Group

Assuming the 90 days horizon Awakn Life Sciences is expected to generate 5.74 times more return on investment than Pharming Group. However, Awakn Life is 5.74 times more volatile than Pharming Group NV. It trades about 0.04 of its potential returns per unit of risk. Pharming Group NV is currently generating about -0.02 per unit of risk. If you would invest  11.00  in Awakn Life Sciences on September 24, 2024 and sell it today you would lose (4.50) from holding Awakn Life Sciences or give up 40.91% of portfolio value over 90 days.

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

Awakn Life Sciences  vs.  Pharming Group NV

Awakn Life Sciences

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Awakn Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Awakn Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pharming Group NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pharming Group NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pharming Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Awakn Life and Pharming Group

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

The idea behind Awakn Life Sciences and Pharming Group NV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.