Correlation Between Biofrontera Warrants and NRx Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Biofrontera Warrants 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 Warrants 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 Warrants and NRx Pharmaceuticals, you can compare the effects of market volatilities on Biofrontera Warrants 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 Warrants with a short position of NRx Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biofrontera Warrants and NRx Pharmaceuticals.

Diversification Opportunities for Biofrontera Warrants and NRx Pharmaceuticals

0.2

Correlation Coefficient

Biofrontera Warrants  NRx Pharmaceuticals

Modest diversification

The 3 months correlation between Biofrontera and NRx is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Biofrontera Warrants and NRx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRx Pharmaceuticals and Biofrontera Warrants 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 Warrants 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 Warrants i.e., Biofrontera Warrants and NRx Pharmaceuticals go up and down completely randomly.

Pair Corralation between Biofrontera Warrants and NRx Pharmaceuticals

Assuming the 90 days horizon Biofrontera Warrants is expected to generate 5.26 times more return on investment than NRx Pharmaceuticals. However, Biofrontera Warrants is 5.26 times more volatile than NRx Pharmaceuticals. It trades about 0.21 of its potential returns per unit of risk. NRx Pharmaceuticals is currently generating about 0.15 per unit of risk. If you would invest  2.09  in Biofrontera Warrants on September 21, 2024 and sell it today you would earn a total of  6.91  from holding Biofrontera Warrants or generate 330.62% return on investment over 90 days.

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

Biofrontera Warrants  vs.  NRx Pharmaceuticals

Biofrontera Warrants

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera Warrants are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Biofrontera Warrants showed solid returns over the last few months and may actually be approaching a breakup point.

NRx Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRx Pharmaceuticals are ranked lower than 4 (%) 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 Warrants and NRx Pharmaceuticals

The main advantage of trading using opposite Biofrontera Warrants and NRx Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biofrontera Warrants 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 Warrants 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.