Correlation Between Universe Pharmaceuticals and Biofrontera

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

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

Diversification Opportunities for Universe Pharmaceuticals and Biofrontera

0.27

Correlation Coefficient

Universe Pharmaceuticals  Biofrontera

Modest diversification

The 3 months correlation between Universe and Biofrontera is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Universe Pharmaceuticals and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera and Universe 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 Universe 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 Universe Pharmaceuticals i.e., Universe Pharmaceuticals and Biofrontera go up and down completely randomly.

Pair Corralation between Universe Pharmaceuticals and Biofrontera

Considering the 90-day investment horizon Universe Pharmaceuticals is expected to under-perform the Biofrontera. In addition to that, Universe Pharmaceuticals is 3.51 times more volatile than Biofrontera. It trades about -0.02 of its total potential returns per unit of risk. Biofrontera is currently generating about 0.01 per unit of volatility. If you would invest  125.00  in Biofrontera on September 14, 2024 and sell it today you would lose (19.00) from holding Biofrontera or give up 15.2% of portfolio value over 90 days.

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

Universe Pharmaceuticals  vs.  Biofrontera

Universe Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universe Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Biofrontera

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Biofrontera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Universe Pharmaceuticals and Biofrontera

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.