Correlation Between Charlottes Web and Biofrontera

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

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

Diversification Opportunities for Charlottes Web and Biofrontera

0.08

Correlation Coefficient

Charlottes Web  Biofrontera

Significant diversification

The 3 months correlation between Charlottes and Biofrontera is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Charlottes Web Holdings and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera and Charlottes Web 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 Charlottes Web Holdings are associated (or correlated) with Biofrontera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofrontera has no effect on the direction of Charlottes Web i.e., Charlottes Web and Biofrontera go up and down completely randomly.

Pair Corralation between Charlottes Web and Biofrontera

Assuming the 90 days horizon Charlottes Web Holdings is expected to under-perform the Biofrontera. In addition to that, Charlottes Web is 1.39 times more volatile than Biofrontera. It trades about -0.04 of its total potential returns per unit of risk. Biofrontera is currently generating about 0.07 per unit of volatility. If you would invest  90.00  in Biofrontera on November 29, 2024 and sell it today you would earn a total of  12.00  from holding Biofrontera or generate 13.33% return on investment over 90 days.

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

Charlottes Web Holdings  vs.  Biofrontera

Charlottes Web Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charlottes Web Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Biofrontera

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Biofrontera demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charlottes Web and Biofrontera

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

The idea behind Charlottes Web Holdings and Biofrontera 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.