Correlation Between Biofrontera Warrants and Star Equity

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

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

Diversification Opportunities for Biofrontera Warrants and Star Equity

-0.12

Correlation Coefficient

Biofrontera Warrants  Star Equity

Good diversification

The 3 months correlation between Biofrontera and Star is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Biofrontera Warrants and Star Equity Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Equity Holdings 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 Star Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Equity Holdings has no effect on the direction of Biofrontera Warrants i.e., Biofrontera Warrants and Star Equity go up and down completely randomly.

Pair Corralation between Biofrontera Warrants and Star Equity

Assuming the 90 days horizon Biofrontera Warrants is expected to generate 6.91 times more return on investment than Star Equity. However, Biofrontera Warrants is 6.91 times more volatile than Star Equity Holdings. It trades about 0.07 of its potential returns per unit of risk. Star Equity Holdings is currently generating about 0.08 per unit of risk. If you would invest  9.37  in Biofrontera Warrants on December 30, 2024 and sell it today you would lose (3.35) from holding Biofrontera Warrants or give up 35.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.45%
Values	Daily Returns

Biofrontera Warrants  vs.  Star Equity Holdings

Biofrontera Warrants

Risk-Adjusted Performance

Modest

Over the last 90 days Biofrontera Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Star Equity Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Star Equity Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Star Equity reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biofrontera Warrants and Star Equity

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

The idea behind Biofrontera Warrants and Star Equity Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.