Correlation Between Faron Pharmaceuticals and Ondine Biomedical

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

By analyzing existing cross correlation between Faron Pharmaceuticals Oy and Ondine Biomedical, you can compare the effects of market volatilities on Faron Pharmaceuticals and Ondine Biomedical 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 Faron Pharmaceuticals with a short position of Ondine Biomedical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faron Pharmaceuticals and Ondine Biomedical.

Diversification Opportunities for Faron Pharmaceuticals and Ondine Biomedical

-0.82

Correlation Coefficient

Faron Pharmaceuticals  Ondine Biomedical

Pay attention - limited upside

The 3 months correlation between Faron and Ondine is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Faron Pharmaceuticals Oy and Ondine Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ondine Biomedical and Faron Pharmaceuticals 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 Faron Pharmaceuticals Oy are associated (or correlated) with Ondine Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ondine Biomedical has no effect on the direction of Faron Pharmaceuticals i.e., Faron Pharmaceuticals and Ondine Biomedical go up and down completely randomly.

Pair Corralation between Faron Pharmaceuticals and Ondine Biomedical

Assuming the 90 days trading horizon Faron Pharmaceuticals Oy is expected to generate 2.36 times more return on investment than Ondine Biomedical. However, Faron Pharmaceuticals is 2.36 times more volatile than Ondine Biomedical. It trades about 0.16 of its potential returns per unit of risk. Ondine Biomedical is currently generating about 0.08 per unit of risk. If you would invest  14,250  in Faron Pharmaceuticals Oy on September 23, 2024 and sell it today you would earn a total of  2,250  from holding Faron Pharmaceuticals Oy or generate 15.79% return on investment over 90 days.

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

Faron Pharmaceuticals Oy  vs.  Ondine Biomedical

Faron Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faron Pharmaceuticals Oy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ondine Biomedical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ondine Biomedical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ondine Biomedical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Faron Pharmaceuticals and Ondine Biomedical

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

The idea behind Faron Pharmaceuticals Oy and Ondine Biomedical 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.