Correlation Between Biofrontera and Khiron Life

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

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

Diversification Opportunities for Biofrontera and Khiron Life

0.22

Correlation Coefficient

Biofrontera  Khiron Life

Modest diversification

The 3 months correlation between Biofrontera and Khiron is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Biofrontera and Khiron Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khiron Life Sciences and Biofrontera 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 Biofrontera are associated (or correlated) with Khiron Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khiron Life Sciences has no effect on the direction of Biofrontera i.e., Biofrontera and Khiron Life go up and down completely randomly.

Pair Corralation between Biofrontera and Khiron Life

Given the investment horizon of 90 days Biofrontera is expected to under-perform the Khiron Life. But the stock apears to be less risky and, when comparing its historical volatility, Biofrontera is 10.11 times less risky than Khiron Life. The stock trades about -0.01 of its potential returns per unit of risk. The Khiron Life Sciences is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Khiron Life Sciences on September 14, 2024 and sell it today you would lose (0.59) from holding Khiron Life Sciences or give up 98.33% of portfolio value over 90 days.

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

Biofrontera  vs.  Khiron Life Sciences

Biofrontera

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Biofrontera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Khiron Life Sciences

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Khiron Life Sciences are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Khiron Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biofrontera and Khiron Life

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

The idea behind Biofrontera and Khiron Life Sciences 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.