Correlation Between Taisho Pharmaceutical and Biofrontera

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

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

Diversification Opportunities for Taisho Pharmaceutical and Biofrontera

0.6

Correlation Coefficient

Taisho Pharmaceutical  Biofrontera

Poor diversification

The 3 months correlation between Taisho and Biofrontera is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Taisho Pharmaceutical Holdings and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera and Taisho Pharmaceutical 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 Taisho Pharmaceutical Holdings 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 Taisho Pharmaceutical i.e., Taisho Pharmaceutical and Biofrontera go up and down completely randomly.

Pair Corralation between Taisho Pharmaceutical and Biofrontera

If you would invest  129.00  in Biofrontera on September 18, 2024 and sell it today you would lose (25.00) from holding Biofrontera or give up 19.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Taisho Pharmaceutical Holdings  vs.  Biofrontera

Taisho Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taisho Pharmaceutical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Taisho Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Biofrontera

Risk-Adjusted Performance

0 of 100

Very 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 Taisho Pharmaceutical and Biofrontera

The main advantage of trading using opposite Taisho Pharmaceutical and Biofrontera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taisho Pharmaceutical 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 Taisho Pharmaceutical Holdings 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.