Correlation Between Ams AG and BB Biotech

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

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

Diversification Opportunities for Ams AG and BB Biotech

0.1

Correlation Coefficient

Ams AG  BB Biotech

Average diversification

The 3 months correlation between Ams and BION is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ams AG 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 Ams AG 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 Ams AG 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 Ams AG i.e., Ams AG and BB Biotech go up and down completely randomly.

Pair Corralation between Ams AG and BB Biotech

Assuming the 90 days trading horizon Ams AG is expected to generate 3.47 times more return on investment than BB Biotech. However, Ams AG is 3.47 times more volatile than BB Biotech AG. It trades about 0.16 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.04 per unit of risk. If you would invest  612.00  in Ams AG on December 5, 2024 and sell it today you would earn a total of  262.00  from holding Ams AG or generate 42.81% return on investment over 90 days.

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

Ams AG  vs.  BB Biotech AG

Ams AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ams AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ams AG showed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of fairly stable basic indicators, BB Biotech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ams AG and BB Biotech

The main advantage of trading using opposite Ams AG and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ams AG 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 Ams AG 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.