Correlation Between Nuvation Bio and Biofrontera Warrants

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

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

Diversification Opportunities for Nuvation Bio and Biofrontera Warrants

-0.14

Correlation Coefficient

Nuvation Bio  Biofrontera Warrants

Good diversification

The 3 months correlation between Nuvation and Biofrontera is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nuvation Bio and Biofrontera Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera Warrants and Nuvation Bio 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 Nuvation Bio 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 Nuvation Bio i.e., Nuvation Bio and Biofrontera Warrants go up and down completely randomly.

Pair Corralation between Nuvation Bio and Biofrontera Warrants

Given the investment horizon of 90 days Nuvation Bio is expected to under-perform the Biofrontera Warrants. But the stock apears to be less risky and, when comparing its historical volatility, Nuvation Bio is 5.27 times less risky than Biofrontera Warrants. The stock trades about -0.15 of its potential returns per unit of risk. The Biofrontera Warrants is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.25  in Biofrontera Warrants on December 2, 2024 and sell it today you would earn a total of  1.74  from holding Biofrontera Warrants or generate 21.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.57%
Values	Daily Returns

Nuvation Bio  vs.  Biofrontera Warrants

Nuvation Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvation Bio 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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing 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 Nuvation Bio and Biofrontera Warrants

The main advantage of trading using opposite Nuvation Bio and Biofrontera Warrants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvation Bio 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 Nuvation Bio 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.