Correlation Between Acasti Pharma and Biomarin Pharmaceutical

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

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

Diversification Opportunities for Acasti Pharma and Biomarin Pharmaceutical

-0.52

Correlation Coefficient

Acasti Pharma  Biomarin Pharmaceutical

Excellent diversification

The 3 months correlation between Acasti and Biomarin is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Acasti Pharma and Biomarin Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomarin Pharmaceutical and Acasti Pharma 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 Acasti Pharma are associated (or correlated) with Biomarin Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomarin Pharmaceutical has no effect on the direction of Acasti Pharma i.e., Acasti Pharma and Biomarin Pharmaceutical go up and down completely randomly.

Pair Corralation between Acasti Pharma and Biomarin Pharmaceutical

Given the investment horizon of 90 days Acasti Pharma is expected to under-perform the Biomarin Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Acasti Pharma is 1.71 times less risky than Biomarin Pharmaceutical. The stock trades about -0.1 of its potential returns per unit of risk. The Biomarin Pharmaceutical is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  8,381  in Biomarin Pharmaceutical on January 17, 2024 and sell it today you would earn a total of  770.00  from holding Biomarin Pharmaceutical or generate 9.19% return on investment over 90 days.

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

Acasti Pharma  vs.  Biomarin Pharmaceutical

Acasti Pharma

Risk-Adjusted Performance

16 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acasti Pharma are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Acasti Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Biomarin Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomarin Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Biomarin Pharmaceutical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Acasti Pharma and Biomarin Pharmaceutical

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

The idea behind Acasti Pharma and Biomarin Pharmaceutical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.