Correlation Between Phibro Animal and Biofrontera

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

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

Diversification Opportunities for Phibro Animal and Biofrontera

-0.65

Correlation Coefficient

Phibro Animal  Biofrontera

Excellent diversification

The 3 months correlation between Phibro and Biofrontera is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera and Phibro Animal 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 Phibro Animal Health are associated (or correlated) with Biofrontera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofrontera has no effect on the direction of Phibro Animal i.e., Phibro Animal and Biofrontera go up and down completely randomly.

Pair Corralation between Phibro Animal and Biofrontera

Given the investment horizon of 90 days Phibro Animal Health is expected to under-perform the Biofrontera. But the stock apears to be less risky and, when comparing its historical volatility, Phibro Animal Health is 3.7 times less risky than Biofrontera. The stock trades about -0.08 of its potential returns per unit of risk. The Biofrontera is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Biofrontera on October 24, 2024 and sell it today you would earn a total of  13.00  from holding Biofrontera or generate 13.4% return on investment over 90 days.

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

Phibro Animal Health  vs.  Biofrontera

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Biofrontera

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Biofrontera demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Biofrontera

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

The idea behind Phibro Animal Health and Biofrontera 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.