Correlation Between BB Biotech and SPDR MSCI

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

Diversification Opportunities for BB Biotech and SPDR MSCI

0.11

Correlation Coefficient

BB Biotech  SPDR MSCI

Average diversification

The 3 months correlation between BION and SPDR is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BB Biotech AG and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of BB Biotech i.e., BB Biotech and SPDR MSCI go up and down completely randomly.

Pair Corralation between BB Biotech and SPDR MSCI

Assuming the 90 days trading horizon BB Biotech is expected to generate 1.58 times less return on investment than SPDR MSCI. In addition to that, BB Biotech is 1.1 times more volatile than SPDR MSCI Europe. It trades about 0.32 of its total potential returns per unit of risk. SPDR MSCI Europe is currently generating about 0.56 per unit of volatility. If you would invest  16,830  in SPDR MSCI Europe on October 21, 2024 and sell it today you would earn a total of  2,170  from holding SPDR MSCI Europe or generate 12.89% return on investment over 90 days.

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

BB Biotech AG  vs.  SPDR MSCI Europe

BB Biotech AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

SPDR MSCI Europe

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR MSCI 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 SPDR MSCI

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

The idea behind BB Biotech AG and SPDR MSCI Europe 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.