Correlation Between BB Biotech and Xtrackers Switzerland

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

Diversification Opportunities for BB Biotech and Xtrackers Switzerland

0.03

Correlation Coefficient

BB Biotech  Xtrackers Switzerland

Significant diversification

The 3 months correlation between BION and Xtrackers is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BB Biotech AG and Xtrackers Switzerland UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Switzerland 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 Xtrackers Switzerland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Switzerland has no effect on the direction of BB Biotech i.e., BB Biotech and Xtrackers Switzerland go up and down completely randomly.

Pair Corralation between BB Biotech and Xtrackers Switzerland

Assuming the 90 days trading horizon BB Biotech AG is expected to under-perform the Xtrackers Switzerland. In addition to that, BB Biotech is 1.91 times more volatile than Xtrackers Switzerland UCITS. It trades about -0.03 of its total potential returns per unit of risk. Xtrackers Switzerland UCITS is currently generating about 0.26 per unit of volatility. If you would invest  11,826  in Xtrackers Switzerland UCITS on December 25, 2024 and sell it today you would earn a total of  1,454  from holding Xtrackers Switzerland UCITS or generate 12.29% 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.  Xtrackers Switzerland UCITS

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.

Xtrackers Switzerland

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Switzerland UCITS are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xtrackers Switzerland may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BB Biotech and Xtrackers Switzerland

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

The idea behind BB Biotech AG and Xtrackers Switzerland UCITS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.