Correlation Between Daito Trust and BB Biotech

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

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

Diversification Opportunities for Daito Trust and BB Biotech

-0.5

Correlation Coefficient

Daito Trust  BB Biotech

Very good diversification

The 3 months correlation between Daito and BBZA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction 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 Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and BB Biotech go up and down completely randomly.

Pair Corralation between Daito Trust and BB Biotech

Assuming the 90 days horizon Daito Trust Construction is expected to under-perform the BB Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Daito Trust Construction is 1.37 times less risky than BB Biotech. The stock trades about -0.09 of its potential returns per unit of risk. The BB Biotech AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,035  in BB Biotech AG on November 29, 2024 and sell it today you would lose (40.00) from holding BB Biotech AG or give up 0.99% of portfolio value over 90 days.

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

Daito Trust Construction  vs.  BB Biotech AG

Daito Trust Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BB Biotech AG

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Daito Trust and BB Biotech

The main advantage of trading using opposite Daito Trust and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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 Daito Trust Construction 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.