Correlation Between Biofrontera and Quantum BioPharma

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

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

Diversification Opportunities for Biofrontera and Quantum BioPharma

0.33

Correlation Coefficient

Biofrontera  Quantum BioPharma

Weak diversification

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

Pair Corralation between Biofrontera and Quantum BioPharma

Given the investment horizon of 90 days Biofrontera is expected to under-perform the Quantum BioPharma. But the stock apears to be less risky and, when comparing its historical volatility, Biofrontera is 4.39 times less risky than Quantum BioPharma. The stock trades about -0.04 of its potential returns per unit of risk. The Quantum BioPharma is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  321.00  in Quantum BioPharma on December 23, 2024 and sell it today you would earn a total of  245.00  from holding Quantum BioPharma or generate 76.32% return on investment over 90 days.

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

Biofrontera  vs.  Quantum BioPharma

Biofrontera

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biofrontera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Quantum BioPharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum BioPharma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Quantum BioPharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biofrontera and Quantum BioPharma

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

The idea behind Biofrontera and Quantum BioPharma 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.