Correlation Between Biofrontera and NRx Pharmaceuticals

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

By analyzing existing cross correlation between Biofrontera and NRx Pharmaceuticals, you can compare the effects of market volatilities on Biofrontera and NRx Pharmaceuticals 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 NRx Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biofrontera and NRx Pharmaceuticals.

Diversification Opportunities for Biofrontera and NRx Pharmaceuticals

-0.06

Correlation Coefficient

Biofrontera  NRx Pharmaceuticals

Good diversification

The 3 months correlation between Biofrontera and NRx is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Biofrontera and NRx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRx Pharmaceuticals 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 NRx Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRx Pharmaceuticals has no effect on the direction of Biofrontera i.e., Biofrontera and NRx Pharmaceuticals go up and down completely randomly.

Pair Corralation between Biofrontera and NRx Pharmaceuticals

Given the investment horizon of 90 days Biofrontera is expected to generate 31.75 times less return on investment than NRx Pharmaceuticals. But when comparing it to its historical volatility, Biofrontera is 7.81 times less risky than NRx Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. NRx Pharmaceuticals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14.00  in NRx Pharmaceuticals on October 14, 2024 and sell it today you would earn a total of  20.00  from holding NRx Pharmaceuticals or generate 142.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.11%
Values	Daily Returns

Biofrontera  vs.  NRx Pharmaceuticals

Biofrontera

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Biofrontera demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NRx Pharmaceuticals

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NRx Pharmaceuticals are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NRx Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biofrontera and NRx Pharmaceuticals

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

The idea behind Biofrontera and NRx Pharmaceuticals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.