Correlation Between Fennec Pharmaceuticals and Biohaven Pharmaceutical

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

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

Diversification Opportunities for Fennec Pharmaceuticals and Biohaven Pharmaceutical

-0.67

Correlation Coefficient

Fennec Pharmaceuticals  Biohaven Pharmaceutical

Excellent diversification

The 3 months correlation between Fennec and Biohaven is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fennec Pharmaceuticals and Biohaven Pharmaceutical Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biohaven Pharmaceutical and Fennec 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 Fennec Pharmaceuticals are associated (or correlated) with Biohaven Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biohaven Pharmaceutical has no effect on the direction of Fennec Pharmaceuticals i.e., Fennec Pharmaceuticals and Biohaven Pharmaceutical go up and down completely randomly.

Pair Corralation between Fennec Pharmaceuticals and Biohaven Pharmaceutical

Given the investment horizon of 90 days Fennec Pharmaceuticals is expected to generate 1.48 times less return on investment than Biohaven Pharmaceutical. In addition to that, Fennec Pharmaceuticals is 1.24 times more volatile than Biohaven Pharmaceutical Holding. It trades about 0.05 of its total potential returns per unit of risk. Biohaven Pharmaceutical Holding is currently generating about 0.09 per unit of volatility. If you would invest  3,940  in Biohaven Pharmaceutical Holding on August 30, 2024 and sell it today you would earn a total of  698.00  from holding Biohaven Pharmaceutical Holding or generate 17.72% return on investment over 90 days.

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

Fennec Pharmaceuticals  vs.  Biohaven Pharmaceutical Holdin

Fennec Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

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

Biohaven Pharmaceutical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biohaven Pharmaceutical Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Biohaven Pharmaceutical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fennec Pharmaceuticals and Biohaven Pharmaceutical

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

The idea behind Fennec Pharmaceuticals and Biohaven Pharmaceutical Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .