Correlation Between BB Biotech and Broadwind

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

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

Diversification Opportunities for BB Biotech and Broadwind

-0.14

Correlation Coefficient

BB Biotech  Broadwind

Good diversification

The 3 months correlation between BBZA and Broadwind is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BB Biotech AG and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and BB Biotech 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 BB Biotech AG are associated (or correlated) with Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of BB Biotech i.e., BB Biotech and Broadwind go up and down completely randomly.

Pair Corralation between BB Biotech and Broadwind

Assuming the 90 days trading horizon BB Biotech is expected to generate 16.33 times less return on investment than Broadwind. But when comparing it to its historical volatility, BB Biotech AG is 3.09 times less risky than Broadwind. It trades about 0.01 of its potential returns per unit of risk. Broadwind is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  194.00  in Broadwind on October 10, 2024 and sell it today you would earn a total of  13.00  from holding Broadwind or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

BB Biotech AG  vs.  Broadwind

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. 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.

Broadwind

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadwind reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BB Biotech and Broadwind

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

The idea behind BB Biotech AG and Broadwind 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.