Correlation Between Pharming Group and Avantium Holding

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Can any of the company-specific risk be diversified away by investing in both Pharming Group and Avantium Holding 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 Pharming Group and Avantium Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pharming Group NV and Avantium Holding BV, you can compare the effects of market volatilities on Pharming Group and Avantium Holding 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 Pharming Group with a short position of Avantium Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharming Group and Avantium Holding.

Diversification Opportunities for Pharming Group and Avantium Holding

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Pharming and Avantium is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pharming Group NV and Avantium Holding BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantium Holding and Pharming Group 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 Pharming Group NV are associated (or correlated) with Avantium Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantium Holding has no effect on the direction of Pharming Group i.e., Pharming Group and Avantium Holding go up and down completely randomly.

Pair Corralation between Pharming Group and Avantium Holding

Assuming the 90 days trading horizon Pharming Group NV is expected to generate 0.8 times more return on investment than Avantium Holding. However, Pharming Group NV is 1.25 times less risky than Avantium Holding. It trades about 0.11 of its potential returns per unit of risk. Avantium Holding BV is currently generating about -0.02 per unit of risk. If you would invest  70.00  in Pharming Group NV on September 18, 2024 and sell it today you would earn a total of  15.00  from holding Pharming Group NV or generate 21.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Pharming Group NV  vs.  Avantium Holding BV

 Performance 
       Timeline  
Pharming Group NV 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pharming Group NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Pharming Group sustained solid returns over the last few months and may actually be approaching a breakup point.
Avantium Holding 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Avantium Holding BV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Avantium Holding is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pharming Group and Avantium Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pharming Group and Avantium Holding

The main advantage of trading using opposite Pharming Group and Avantium Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pharming Group position performs unexpectedly, Avantium Holding 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 Avantium Holding will offset losses from the drop in Avantium Holding's long position.
The idea behind Pharming Group NV and Avantium Holding BV 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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