Correlation Between Harmony Biosciences and Brickell Biotech

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

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

Diversification Opportunities for Harmony Biosciences and Brickell Biotech

0.27

Correlation Coefficient

Harmony Biosciences  Brickell Biotech

Modest diversification

The 3 months correlation between Harmony and Brickell is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Biosciences Holdings and Brickell Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickell Biotech and Harmony Biosciences 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 Harmony Biosciences Holdings are associated (or correlated) with Brickell Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickell Biotech has no effect on the direction of Harmony Biosciences i.e., Harmony Biosciences and Brickell Biotech go up and down completely randomly.

Pair Corralation between Harmony Biosciences and Brickell Biotech

Given the investment horizon of 90 days Harmony Biosciences Holdings is expected to under-perform the Brickell Biotech. In addition to that, Harmony Biosciences is 1.38 times more volatile than Brickell Biotech. It trades about -0.21 of its total potential returns per unit of risk. Brickell Biotech is currently generating about -0.04 per unit of volatility. If you would invest  93.00  in Brickell Biotech on January 20, 2024 and sell it today you would lose (2.00) from holding Brickell Biotech or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Harmony Biosciences Holdings  vs.  Brickell Biotech

Harmony Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Biosciences Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Brickell Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Harmony Biosciences and Brickell Biotech

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

The idea behind Harmony Biosciences Holdings and Brickell Biotech 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.