Correlation Between Biofrontera Warrants and Century Therapeutics

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

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

Diversification Opportunities for Biofrontera Warrants and Century Therapeutics

-0.4

Correlation Coefficient

Biofrontera Warrants  Century Therapeutics

Very good diversification

The 3 months correlation between Biofrontera and Century is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Biofrontera Warrants and Century Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Therapeutics and Biofrontera Warrants 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 Biofrontera Warrants are associated (or correlated) with Century Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Therapeutics has no effect on the direction of Biofrontera Warrants i.e., Biofrontera Warrants and Century Therapeutics go up and down completely randomly.

Pair Corralation between Biofrontera Warrants and Century Therapeutics

Assuming the 90 days horizon Biofrontera Warrants is expected to generate 30.22 times more return on investment than Century Therapeutics. However, Biofrontera Warrants is 30.22 times more volatile than Century Therapeutics. It trades about 0.21 of its potential returns per unit of risk. Century Therapeutics is currently generating about 0.04 per unit of risk. If you would invest  0.00  in Biofrontera Warrants on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Biofrontera Warrants or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.56%
Values	Daily Returns

Biofrontera Warrants  vs.  Century Therapeutics

Biofrontera Warrants

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera Warrants are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Biofrontera Warrants showed solid returns over the last few months and may actually be approaching a breakup point.

Century Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Century Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biofrontera Warrants and Century Therapeutics

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

The idea behind Biofrontera Warrants and Century Therapeutics 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.