Correlation Between Basler Kantonalbank and BB Biotech

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

By analyzing existing cross correlation between Basler Kantonalbank and BB Biotech AG, you can compare the effects of market volatilities on Basler Kantonalbank and BB Biotech 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 Basler Kantonalbank with a short position of BB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basler Kantonalbank and BB Biotech.

Diversification Opportunities for Basler Kantonalbank and BB Biotech

0.41

Correlation Coefficient

Basler Kantonalbank  BB Biotech

Very weak diversification

The 3 months correlation between Basler and BION is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Basler Kantonalbank and BB Biotech AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Biotech AG and Basler Kantonalbank 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 Basler Kantonalbank are associated (or correlated) with BB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Biotech AG has no effect on the direction of Basler Kantonalbank i.e., Basler Kantonalbank and BB Biotech go up and down completely randomly.

Pair Corralation between Basler Kantonalbank and BB Biotech

Assuming the 90 days trading horizon Basler Kantonalbank is expected to generate 0.63 times more return on investment than BB Biotech. However, Basler Kantonalbank is 1.6 times less risky than BB Biotech. It trades about 0.07 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.03 per unit of risk. If you would invest  6,066  in Basler Kantonalbank on December 3, 2024 and sell it today you would earn a total of  1,794  from holding Basler Kantonalbank or generate 29.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Basler Kantonalbank  vs.  BB Biotech AG

Basler Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Basler Kantonalbank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Basler Kantonalbank showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Basler Kantonalbank and BB Biotech

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

The idea behind Basler Kantonalbank and BB Biotech AG 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.