Correlation Between Transportadora and BB Biotech

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

By analyzing existing cross correlation between Transportadora de Gas and BB Biotech AG, you can compare the effects of market volatilities on Transportadora and BB 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 Transportadora with a short position of BB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and BB Biotech.

Diversification Opportunities for Transportadora and BB Biotech

0.39

Correlation Coefficient

Transportadora  BB Biotech

Weak diversification

The 3 months correlation between Transportadora and BBZA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and BB Biotech AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Biotech AG and Transportadora 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 Transportadora de Gas are associated (or correlated) with BB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Biotech AG has no effect on the direction of Transportadora i.e., Transportadora and BB Biotech go up and down completely randomly.

Pair Corralation between Transportadora and BB Biotech

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 2.85 times more return on investment than BB Biotech. However, Transportadora is 2.85 times more volatile than BB Biotech AG. It trades about 0.08 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.01 per unit of risk. If you would invest  1,150  in Transportadora de Gas on September 12, 2024 and sell it today you would earn a total of  1,490  from holding Transportadora de Gas or generate 129.57% return on investment over 90 days.

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

Transportadora de Gas  vs.  BB Biotech AG

Transportadora de Gas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

BB Biotech AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BB Biotech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Transportadora and BB Biotech

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

The idea behind Transportadora de Gas and BB Biotech 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.