Correlation Between Eagle Pharmaceuticals and Biofrontera

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

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

Diversification Opportunities for Eagle Pharmaceuticals and Biofrontera

0.65

Correlation Coefficient

Eagle Pharmaceuticals  Biofrontera

Poor diversification

The 3 months correlation between Eagle and Biofrontera is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Pharmaceuticals and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera and Eagle 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 Eagle 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 Eagle Pharmaceuticals i.e., Eagle Pharmaceuticals and Biofrontera go up and down completely randomly.

Pair Corralation between Eagle Pharmaceuticals and Biofrontera

Given the investment horizon of 90 days Eagle Pharmaceuticals is expected to under-perform the Biofrontera. In addition to that, Eagle Pharmaceuticals is 1.08 times more volatile than Biofrontera. It trades about -0.32 of its total potential returns per unit of risk. Biofrontera is currently generating about 0.01 per unit of volatility. If you would invest  112.00  in Biofrontera on September 5, 2024 and sell it today you would lose (18.00) from holding Biofrontera or give up 16.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	34.38%
Values	Daily Returns

Eagle Pharmaceuticals  vs.  Biofrontera

Eagle Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Biofrontera

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Biofrontera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Biofrontera is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Eagle Pharmaceuticals and Biofrontera

The main advantage of trading using opposite Eagle Pharmaceuticals and Biofrontera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle 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 Eagle 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.