Correlation Between Active Biotech and BioInvent International

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

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

Diversification Opportunities for Active Biotech and BioInvent International

-0.02

Correlation Coefficient

Active Biotech  BioInvent International

Good diversification

The 3 months correlation between Active and BioInvent is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Active Biotech AB and BioInvent International AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioInvent International and Active Biotech 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 Active Biotech AB are associated (or correlated) with BioInvent International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioInvent International has no effect on the direction of Active Biotech i.e., Active Biotech and BioInvent International go up and down completely randomly.

Pair Corralation between Active Biotech and BioInvent International

Assuming the 90 days trading horizon Active Biotech AB is expected to generate 9.61 times more return on investment than BioInvent International. However, Active Biotech is 9.61 times more volatile than BioInvent International AB. It trades about 0.01 of its potential returns per unit of risk. BioInvent International AB is currently generating about -0.02 per unit of risk. If you would invest  42.00  in Active Biotech AB on September 12, 2024 and sell it today you would lose (31.00) from holding Active Biotech AB or give up 73.81% of portfolio value over 90 days.

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

Active Biotech AB  vs.  BioInvent International AB

Active Biotech AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Active Biotech AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Active Biotech unveiled solid returns over the last few months and may actually be approaching a breakup point.

BioInvent International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Active Biotech and BioInvent International

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

The idea behind Active Biotech AB and BioInvent International AB 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.