Correlation Between Dermata Therapeutics and Biofrontera Warrants

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

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

Diversification Opportunities for Dermata Therapeutics and Biofrontera Warrants

-0.27

Correlation Coefficient

Dermata Therapeutics  Biofrontera Warrants

Very good diversification

The 3 months correlation between Dermata and Biofrontera is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dermata Therapeutics Warrant and Biofrontera Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera Warrants and Dermata Therapeutics 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 Dermata Therapeutics Warrant 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 Dermata Therapeutics i.e., Dermata Therapeutics and Biofrontera Warrants go up and down completely randomly.

Pair Corralation between Dermata Therapeutics and Biofrontera Warrants

Assuming the 90 days horizon Dermata Therapeutics is expected to generate 1.39 times less return on investment than Biofrontera Warrants. But when comparing it to its historical volatility, Dermata Therapeutics Warrant is 1.8 times less risky than Biofrontera Warrants. It trades about 0.29 of its potential returns per unit of risk. Biofrontera Warrants is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5.15  in Biofrontera Warrants on September 20, 2024 and sell it today you would earn a total of  3.85  from holding Biofrontera Warrants or generate 74.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

Dermata Therapeutics Warrant  vs.  Biofrontera Warrants

Dermata Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dermata Therapeutics Warrant are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dermata Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Dermata Therapeutics and Biofrontera Warrants

The main advantage of trading using opposite Dermata Therapeutics and Biofrontera Warrants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dermata Therapeutics 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 Dermata Therapeutics Warrant 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.