Correlation Between Small Cap and Forward Pharma

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

By analyzing existing cross correlation between Small Cap Premium and Forward Pharma AS, you can compare the effects of market volatilities on Small Cap and Forward Pharma 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 Small Cap with a short position of Forward Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Forward Pharma.

Diversification Opportunities for Small Cap and Forward Pharma

0.0

Correlation Coefficient

Small Cap  Forward Pharma

Pay attention - limited upside

The 3 months correlation between Small and Forward is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Forward Pharma AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Pharma AS and Small Cap 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 Small Cap Premium are associated (or correlated) with Forward Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Pharma AS has no effect on the direction of Small Cap i.e., Small Cap and Forward Pharma go up and down completely randomly.

Pair Corralation between Small Cap and Forward Pharma

If you would invest (100.00) in Forward Pharma AS on December 19, 2024 and sell it today you would earn a total of  100.00  from holding Forward Pharma AS or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Small Cap Premium  vs.  Forward Pharma AS

Small Cap Premium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Premium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Forward Pharma AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forward Pharma AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Forward Pharma is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Forward Pharma

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

The idea behind Small Cap Premium and Forward Pharma AS 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.