Correlation Between Biofrontera and CbdMD

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

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

Diversification Opportunities for Biofrontera and CbdMD

0.74

Correlation Coefficient

Biofrontera  CbdMD

Poor diversification

The 3 months correlation between Biofrontera and CbdMD is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Biofrontera and cbdMD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cbdMD Inc 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 CbdMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cbdMD Inc has no effect on the direction of Biofrontera i.e., Biofrontera and CbdMD go up and down completely randomly.

Pair Corralation between Biofrontera and CbdMD

Given the investment horizon of 90 days Biofrontera is expected to under-perform the CbdMD. But the stock apears to be less risky and, when comparing its historical volatility, Biofrontera is 2.05 times less risky than CbdMD. The stock trades about -0.09 of its potential returns per unit of risk. The cbdMD Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  37.00  in cbdMD Inc on December 30, 2024 and sell it today you would lose (13.00) from holding cbdMD Inc or give up 35.14% of portfolio value over 90 days.

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

Biofrontera  vs.  cbdMD Inc

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

cbdMD Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days cbdMD Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Biofrontera and CbdMD

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

The idea behind Biofrontera and cbdMD Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.