Correlation Between Swedish Orphan and Active Biotech

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

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

Diversification Opportunities for Swedish Orphan and Active Biotech

0.04

Correlation Coefficient

Swedish Orphan  Active Biotech

Significant diversification

The 3 months correlation between Swedish and Active is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Swedish Orphan Biovitrum and Active Biotech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Biotech AB and Swedish Orphan 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 Swedish Orphan Biovitrum are associated (or correlated) with Active Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Biotech AB has no effect on the direction of Swedish Orphan i.e., Swedish Orphan and Active Biotech go up and down completely randomly.

Pair Corralation between Swedish Orphan and Active Biotech

Assuming the 90 days trading horizon Swedish Orphan Biovitrum is expected to under-perform the Active Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Swedish Orphan Biovitrum is 12.98 times less risky than Active Biotech. The stock trades about -0.01 of its potential returns per unit of risk. The Active Biotech AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Active Biotech AB on September 13, 2024 and sell it today you would lose (29.00) from holding Active Biotech AB or give up 72.5% of portfolio value over 90 days.

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

Swedish Orphan Biovitrum  vs.  Active Biotech AB

Swedish Orphan Biovitrum

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Swedish Orphan and Active Biotech

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

The idea behind Swedish Orphan Biovitrum and Active Biotech 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.