Correlation Between Canadian Utilities and Biogen

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

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

Diversification Opportunities for Canadian Utilities and Biogen

0.17

Correlation Coefficient

Canadian Utilities  Biogen

Average diversification

The 3 months correlation between Canadian and Biogen is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and Biogen go up and down completely randomly.

Pair Corralation between Canadian Utilities and Biogen

Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.4 times more return on investment than Biogen. However, Canadian Utilities Limited is 2.5 times less risky than Biogen. It trades about 0.03 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.05 per unit of risk. If you would invest  2,237  in Canadian Utilities Limited on December 22, 2024 and sell it today you would earn a total of  25.00  from holding Canadian Utilities Limited or generate 1.12% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  Biogen Inc

Canadian Utilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Biogen Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canadian Utilities and Biogen

The main advantage of trading using opposite Canadian Utilities and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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 Canadian Utilities Limited 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.