Correlation Between Flora Growth and Biomarin Pharmaceutical

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

By analyzing existing cross correlation between Flora Growth Corp and Biomarin Pharmaceutical, you can compare the effects of market volatilities on Flora Growth and Biomarin Pharmaceutical 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 Flora Growth with a short position of Biomarin Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flora Growth and Biomarin Pharmaceutical.

Diversification Opportunities for Flora Growth and Biomarin Pharmaceutical

0.56

Correlation Coefficient

Flora Growth  Biomarin Pharmaceutical

Very weak diversification

The 3 months correlation between Flora and Biomarin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Flora Growth Corp and Biomarin Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomarin Pharmaceutical and Flora Growth 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 Flora Growth Corp are associated (or correlated) with Biomarin Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomarin Pharmaceutical has no effect on the direction of Flora Growth i.e., Flora Growth and Biomarin Pharmaceutical go up and down completely randomly.

Pair Corralation between Flora Growth and Biomarin Pharmaceutical

Given the investment horizon of 90 days Flora Growth Corp is expected to generate 4.01 times more return on investment than Biomarin Pharmaceutical. However, Flora Growth is 4.01 times more volatile than Biomarin Pharmaceutical. It trades about 0.02 of its potential returns per unit of risk. Biomarin Pharmaceutical is currently generating about -0.06 per unit of risk. If you would invest  148.00  in Flora Growth Corp on October 7, 2024 and sell it today you would lose (38.00) from holding Flora Growth Corp or give up 25.68% of portfolio value over 90 days.

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

Flora Growth Corp  vs.  Biomarin Pharmaceutical

Flora Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flora Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Biomarin Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomarin Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Biomarin Pharmaceutical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Flora Growth and Biomarin Pharmaceutical

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

The idea behind Flora Growth Corp and Biomarin Pharmaceutical 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.