Correlation Between Connect Biopharma and Biofrontera Warrants

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

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

Diversification Opportunities for Connect Biopharma and Biofrontera Warrants

0.14

Correlation Coefficient

Connect Biopharma  Biofrontera Warrants

Average diversification

The 3 months correlation between Connect and Biofrontera is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Biofrontera Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera Warrants and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with Biofrontera Warrants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofrontera Warrants has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and Biofrontera Warrants go up and down completely randomly.

Pair Corralation between Connect Biopharma and Biofrontera Warrants

Given the investment horizon of 90 days Connect Biopharma is expected to generate 75.97 times less return on investment than Biofrontera Warrants. But when comparing it to its historical volatility, Connect Biopharma Holdings is 16.49 times less risky than Biofrontera Warrants. It trades about 0.03 of its potential returns per unit of risk. Biofrontera Warrants is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Biofrontera Warrants on December 2, 2024 and sell it today you would lose (10.01) from holding Biofrontera Warrants or give up 50.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	64.44%
Values	Daily Returns

Connect Biopharma Holdings  vs.  Biofrontera Warrants

Connect Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Biofrontera Warrants

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera Warrants are ranked lower than 8 (%) 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.

Pair Trading with Connect Biopharma and Biofrontera Warrants

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

The idea behind Connect Biopharma Holdings and Biofrontera Warrants 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.