Correlation Between ABVC Biopharma and Bicycle Therapeutics

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

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

Diversification Opportunities for ABVC Biopharma and Bicycle Therapeutics

0.26

Correlation Coefficient

ABVC Biopharma  Bicycle Therapeutics

Modest diversification

The 3 months correlation between ABVC and Bicycle is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ABVC Biopharma and Bicycle Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bicycle Therapeutics and ABVC Biopharma 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 ABVC Biopharma are associated (or correlated) with Bicycle Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bicycle Therapeutics has no effect on the direction of ABVC Biopharma i.e., ABVC Biopharma and Bicycle Therapeutics go up and down completely randomly.

Pair Corralation between ABVC Biopharma and Bicycle Therapeutics

Given the investment horizon of 90 days ABVC Biopharma is expected to generate 0.6 times more return on investment than Bicycle Therapeutics. However, ABVC Biopharma is 1.66 times less risky than Bicycle Therapeutics. It trades about 0.1 of its potential returns per unit of risk. Bicycle Therapeutics is currently generating about -0.16 per unit of risk. If you would invest  55.00  in ABVC Biopharma on October 5, 2024 and sell it today you would earn a total of  4.00  from holding ABVC Biopharma or generate 7.27% return on investment over 90 days.

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

ABVC Biopharma  vs.  Bicycle Therapeutics

ABVC Biopharma

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABVC Biopharma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ABVC Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bicycle Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bicycle Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ABVC Biopharma and Bicycle Therapeutics

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

The idea behind ABVC Biopharma and Bicycle Therapeutics 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..