Correlation Between Pharming Group and Kane Biotech

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

By analyzing existing cross correlation between Pharming Group NV and Kane Biotech, you can compare the effects of market volatilities on Pharming Group and Kane Biotech 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 Pharming Group with a short position of Kane Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharming Group and Kane Biotech.

Diversification Opportunities for Pharming Group and Kane Biotech

0.33

Correlation Coefficient

Pharming Group  Kane Biotech

Weak diversification

The 3 months correlation between Pharming and Kane is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pharming Group NV and Kane Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kane Biotech and Pharming Group 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 Pharming Group NV are associated (or correlated) with Kane Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kane Biotech has no effect on the direction of Pharming Group i.e., Pharming Group and Kane Biotech go up and down completely randomly.

Pair Corralation between Pharming Group and Kane Biotech

Assuming the 90 days horizon Pharming Group NV is expected to under-perform the Kane Biotech. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pharming Group NV is 1.13 times less risky than Kane Biotech. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Kane Biotech is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6.99  in Kane Biotech on December 29, 2024 and sell it today you would lose (0.29) from holding Kane Biotech or give up 4.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Pharming Group NV  vs.  Kane Biotech

Pharming Group NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pharming Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pharming Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kane Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kane Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kane Biotech is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pharming Group and Kane Biotech

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

The idea behind Pharming Group NV and Kane Biotech 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.