Correlation Between BB Biotech and Relief Therapeutics

Can any of the company-specific risk be diversified away by investing in both BB Biotech and Relief 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 BB Biotech and Relief Therapeutics 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 Relief Therapeutics Holding, you can compare the effects of market volatilities on BB Biotech and Relief 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 BB Biotech with a short position of Relief Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Biotech and Relief Therapeutics.

Diversification Opportunities for BB Biotech and Relief Therapeutics

-0.37

Correlation Coefficient

BB Biotech  Relief Therapeutics

Very good diversification

The 3 months correlation between BION and Relief is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BB Biotech AG and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics 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 Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of BB Biotech i.e., BB Biotech and Relief Therapeutics go up and down completely randomly.

Pair Corralation between BB Biotech and Relief Therapeutics

Assuming the 90 days trading horizon BB Biotech AG is expected to generate 0.3 times more return on investment than Relief Therapeutics. However, BB Biotech AG is 3.34 times less risky than Relief Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Relief Therapeutics Holding is currently generating about -0.15 per unit of risk. If you would invest  3,630  in BB Biotech AG on December 5, 2024 and sell it today you would lose (20.00) from holding BB Biotech AG or give up 0.55% of portfolio value over 90 days.

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

BB Biotech AG  vs.  Relief Therapeutics Holding

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.

Relief Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Relief Therapeutics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with BB Biotech and Relief Therapeutics

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

The idea behind BB Biotech AG and Relief Therapeutics Holding 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.