Correlation Between Lion Biotechnologies and BB Biotech

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

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

Diversification Opportunities for Lion Biotechnologies and BB Biotech

0.27

Correlation Coefficient

Lion Biotechnologies  BB Biotech

Modest diversification

The 3 months correlation between Lion and BBZA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies 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 Lion Biotechnologies 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 Lion Biotechnologies 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 Lion Biotechnologies i.e., Lion Biotechnologies and BB Biotech go up and down completely randomly.

Pair Corralation between Lion Biotechnologies and BB Biotech

Assuming the 90 days trading horizon Lion Biotechnologies is expected to generate 3.45 times more return on investment than BB Biotech. However, Lion Biotechnologies is 3.45 times more volatile than BB Biotech AG. It trades about 0.03 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.03 per unit of risk. If you would invest  594.00  in Lion Biotechnologies on September 26, 2024 and sell it today you would earn a total of  114.00  from holding Lion Biotechnologies or generate 19.19% return on investment over 90 days.

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

Lion Biotechnologies  vs.  BB Biotech AG

Lion Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BB Biotech AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Biotech AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BB Biotech is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lion Biotechnologies and BB Biotech

The main advantage of trading using opposite Lion Biotechnologies and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Biotechnologies 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 Lion Biotechnologies 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.