Correlation Between BB Biotech and Schweizerische Nationalbank

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

Diversification Opportunities for BB Biotech and Schweizerische Nationalbank

0.65

Correlation Coefficient

BB Biotech  Schweizerische Nationalbank

Poor diversification

The 3 months correlation between BION and Schweizerische is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BB Biotech AG and Schweizerische Nationalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweizerische Nationalbank 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 Schweizerische Nationalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweizerische Nationalbank has no effect on the direction of BB Biotech i.e., BB Biotech and Schweizerische Nationalbank go up and down completely randomly.

Pair Corralation between BB Biotech and Schweizerische Nationalbank

Assuming the 90 days trading horizon BB Biotech AG is expected to under-perform the Schweizerische Nationalbank. But the stock apears to be less risky and, when comparing its historical volatility, BB Biotech AG is 1.24 times less risky than Schweizerische Nationalbank. The stock trades about 0.0 of its potential returns per unit of risk. The Schweizerische Nationalbank is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  350,000  in Schweizerische Nationalbank on December 3, 2024 and sell it today you would earn a total of  8,000  from holding Schweizerische Nationalbank or generate 2.29% return on investment over 90 days.

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

BB Biotech AG  vs.  Schweizerische Nationalbank

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.

Schweizerische Nationalbank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schweizerische Nationalbank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Schweizerische Nationalbank 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 BB Biotech and Schweizerische Nationalbank

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

The idea behind BB Biotech AG and Schweizerische Nationalbank 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.