Correlation Between Fresh Tracks and Basilea Pharmaceutica

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

By analyzing existing cross correlation between Fresh Tracks Therapeutics and Basilea Pharmaceutica AG, you can compare the effects of market volatilities on Fresh Tracks and Basilea Pharmaceutica 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 Fresh Tracks with a short position of Basilea Pharmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Tracks and Basilea Pharmaceutica.

Diversification Opportunities for Fresh Tracks and Basilea Pharmaceutica

0.76

Correlation Coefficient

Fresh Tracks  Basilea Pharmaceutica

Poor diversification

The 3 months correlation between Fresh and Basilea is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Tracks Therapeutics and Basilea Pharmaceutica AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basilea Pharmaceutica and Fresh Tracks 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 Fresh Tracks Therapeutics are associated (or correlated) with Basilea Pharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basilea Pharmaceutica has no effect on the direction of Fresh Tracks i.e., Fresh Tracks and Basilea Pharmaceutica go up and down completely randomly.

Pair Corralation between Fresh Tracks and Basilea Pharmaceutica

Given the investment horizon of 90 days Fresh Tracks Therapeutics is expected to generate 8.46 times more return on investment than Basilea Pharmaceutica. However, Fresh Tracks is 8.46 times more volatile than Basilea Pharmaceutica AG. It trades about 0.13 of its potential returns per unit of risk. Basilea Pharmaceutica AG is currently generating about 0.02 per unit of risk. If you would invest  59.00  in Fresh Tracks Therapeutics on August 31, 2024 and sell it today you would earn a total of  19.00  from holding Fresh Tracks Therapeutics or generate 32.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	8.58%
Values	Daily Returns

Fresh Tracks Therapeutics  vs.  Basilea Pharmaceutica AG

Fresh Tracks Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresh Tracks Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Fresh Tracks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Basilea Pharmaceutica

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Basilea Pharmaceutica AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Basilea Pharmaceutica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fresh Tracks and Basilea Pharmaceutica

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

The idea behind Fresh Tracks Therapeutics and Basilea Pharmaceutica AG 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.