Correlation Between Pharming Group and Oxford Nanopore

Can any of the company-specific risk be diversified away by investing in both Pharming Group and Oxford Nanopore 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 Oxford Nanopore 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 Oxford Nanopore Technologies, you can compare the effects of market volatilities on Pharming Group and Oxford Nanopore 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 Oxford Nanopore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharming Group and Oxford Nanopore.

Diversification Opportunities for Pharming Group and Oxford Nanopore

-0.46

Correlation Coefficient

Pharming Group  Oxford Nanopore

Very good diversification

The 3 months correlation between Pharming and Oxford is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pharming Group NV and Oxford Nanopore Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Nanopore Tech 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 Oxford Nanopore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Nanopore Tech has no effect on the direction of Pharming Group i.e., Pharming Group and Oxford Nanopore go up and down completely randomly.

Pair Corralation between Pharming Group and Oxford Nanopore

Assuming the 90 days horizon Pharming Group is expected to generate 6.85 times less return on investment than Oxford Nanopore. But when comparing it to its historical volatility, Pharming Group NV is 2.76 times less risky than Oxford Nanopore. It trades about 0.01 of its potential returns per unit of risk. Oxford Nanopore Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Oxford Nanopore Technologies on September 16, 2024 and sell it today you would lose (2.00) from holding Oxford Nanopore Technologies or give up 1.01% of portfolio value over 90 days.

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

Pharming Group NV  vs.  Oxford Nanopore Technologies

Pharming Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pharming Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pharming Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Oxford Nanopore Tech

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Pharming Group and Oxford Nanopore

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

The idea behind Pharming Group NV and Oxford Nanopore Technologies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.