Correlation Between China SXT and Biofrontera

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

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

Diversification Opportunities for China SXT and Biofrontera

-0.04

Correlation Coefficient

China SXT  Biofrontera

Good diversification

The 3 months correlation between China and Biofrontera is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera and China SXT 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 China SXT Pharmaceuticals 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 China SXT i.e., China SXT and Biofrontera go up and down completely randomly.

Pair Corralation between China SXT and Biofrontera

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to generate 1.99 times more return on investment than Biofrontera. However, China SXT is 1.99 times more volatile than Biofrontera. It trades about 0.09 of its potential returns per unit of risk. Biofrontera is currently generating about -0.02 per unit of risk. If you would invest  48.00  in China SXT Pharmaceuticals on October 8, 2024 and sell it today you would earn a total of  4.00  from holding China SXT Pharmaceuticals or generate 8.33% return on investment over 90 days.

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

China SXT Pharmaceuticals  vs.  Biofrontera

China SXT Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China SXT Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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

6 of 100

Modest

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

Pair Trading with China SXT and Biofrontera

The main advantage of trading using opposite China SXT and Biofrontera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China SXT 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 China SXT Pharmaceuticals 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.