Correlation Between Newron Pharmaceuticals and Bachem Holding

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

By analyzing existing cross correlation between Newron Pharmaceuticals SpA and Bachem Holding AG, you can compare the effects of market volatilities on Newron Pharmaceuticals and Bachem Holding 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 Newron Pharmaceuticals with a short position of Bachem Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newron Pharmaceuticals and Bachem Holding.

Diversification Opportunities for Newron Pharmaceuticals and Bachem Holding

-0.48

Correlation Coefficient

Newron Pharmaceuticals  Bachem Holding

Very good diversification

The 3 months correlation between Newron and Bachem is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Newron Pharmaceuticals SpA and Bachem Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bachem Holding AG and Newron 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 Newron Pharmaceuticals SpA are associated (or correlated) with Bachem Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bachem Holding AG has no effect on the direction of Newron Pharmaceuticals i.e., Newron Pharmaceuticals and Bachem Holding go up and down completely randomly.

Pair Corralation between Newron Pharmaceuticals and Bachem Holding

Assuming the 90 days trading horizon Newron Pharmaceuticals SpA is expected to generate 1.81 times more return on investment than Bachem Holding. However, Newron Pharmaceuticals is 1.81 times more volatile than Bachem Holding AG. It trades about 0.08 of its potential returns per unit of risk. Bachem Holding AG is currently generating about -0.15 per unit of risk. If you would invest  856.00  in Newron Pharmaceuticals SpA on October 24, 2024 and sell it today you would earn a total of  121.00  from holding Newron Pharmaceuticals SpA or generate 14.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Newron Pharmaceuticals SpA  vs.  Bachem Holding AG

Newron Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newron Pharmaceuticals SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Newron Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Bachem Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bachem Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Newron Pharmaceuticals and Bachem Holding

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

The idea behind Newron Pharmaceuticals SpA and Bachem Holding AG 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.