Correlation Between Bank of America and Biogen

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

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

Diversification Opportunities for Bank of America and Biogen

-0.8

Correlation Coefficient

Bank of America  Biogen

Pay attention - limited upside

The 3 months correlation between Bank and Biogen is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Bank of America 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 Bank of America are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Bank of America i.e., Bank of America and Biogen go up and down completely randomly.

Pair Corralation between Bank of America and Biogen

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Biogen. In addition to that, Bank of America is 1.14 times more volatile than Biogen Inc. It trades about -0.05 of its total potential returns per unit of risk. Biogen Inc is currently generating about -0.05 per unit of volatility. If you would invest  15,495  in Biogen Inc on September 25, 2024 and sell it today you would lose (225.00) from holding Biogen Inc or give up 1.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Bank of America  vs.  Biogen Inc

Bank of America

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank of America sustained solid returns over the last few months and may actually be approaching a breakup point.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank of America and Biogen

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

The idea behind Bank of America and Biogen Inc 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.