Correlation Between Biotage AB and Sectra AB

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

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

Diversification Opportunities for Biotage AB and Sectra AB

-0.5

Correlation Coefficient

Biotage AB  Sectra AB

Very good diversification

The 3 months correlation between Biotage and Sectra is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Biotage AB and Sectra AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sectra AB and Biotage AB 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 Biotage AB are associated (or correlated) with Sectra AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sectra AB has no effect on the direction of Biotage AB i.e., Biotage AB and Sectra AB go up and down completely randomly.

Pair Corralation between Biotage AB and Sectra AB

Assuming the 90 days trading horizon Biotage AB is expected to under-perform the Sectra AB. In addition to that, Biotage AB is 1.24 times more volatile than Sectra AB. It trades about -0.17 of its total potential returns per unit of risk. Sectra AB is currently generating about 0.19 per unit of volatility. If you would invest  23,582  in Sectra AB on September 3, 2024 and sell it today you would earn a total of  4,888  from holding Sectra AB or generate 20.73% return on investment over 90 days.

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

Biotage AB  vs.  Sectra AB

Biotage AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotage AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sectra AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sectra AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Sectra AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotage AB and Sectra AB

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

The idea behind Biotage AB and Sectra 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.