Correlation Between BioNTech and Analog Devices

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

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

Diversification Opportunities for BioNTech and Analog Devices

0.41

Correlation Coefficient

BioNTech  Analog Devices

Very weak diversification

The 3 months correlation between BioNTech and Analog is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BioNTech SE and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and BioNTech 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 BioNTech SE are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of BioNTech i.e., BioNTech and Analog Devices go up and down completely randomly.

Pair Corralation between BioNTech and Analog Devices

Given the investment horizon of 90 days BioNTech SE is expected to generate 1.92 times more return on investment than Analog Devices. However, BioNTech is 1.92 times more volatile than Analog Devices. It trades about 0.07 of its potential returns per unit of risk. Analog Devices is currently generating about -0.01 per unit of risk. If you would invest  10,500  in BioNTech SE on September 12, 2024 and sell it today you would earn a total of  1,360  from holding BioNTech SE or generate 12.96% return on investment over 90 days.

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

BioNTech SE  vs.  Analog Devices

BioNTech SE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BioNTech SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, BioNTech showed solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BioNTech and Analog Devices

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

The idea behind BioNTech SE and Analog Devices 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.