Correlation Between Genmab AS and CBrain AS

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

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

Diversification Opportunities for Genmab AS and CBrain AS

0.08

Correlation Coefficient

Genmab AS  CBrain AS

Significant diversification

The 3 months correlation between Genmab and CBrain is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Genmab AS and cBrain AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cBrain AS and Genmab AS 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 Genmab AS are associated (or correlated) with CBrain AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cBrain AS has no effect on the direction of Genmab AS i.e., Genmab AS and CBrain AS go up and down completely randomly.

Pair Corralation between Genmab AS and CBrain AS

Assuming the 90 days trading horizon Genmab AS is expected to generate 0.94 times more return on investment than CBrain AS. However, Genmab AS is 1.07 times less risky than CBrain AS. It trades about 0.04 of its potential returns per unit of risk. cBrain AS is currently generating about -0.02 per unit of risk. If you would invest  144,500  in Genmab AS on November 20, 2024 and sell it today you would earn a total of  6,450  from holding Genmab AS or generate 4.46% return on investment over 90 days.

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

Genmab AS  vs.  cBrain AS

Genmab AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genmab AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Genmab AS may actually be approaching a critical reversion point that can send shares even higher in March 2025.

cBrain AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days cBrain AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CBrain AS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genmab AS and CBrain AS

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

The idea behind Genmab AS and cBrain AS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.