Correlation Between IShares Asia and BB Biotech

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

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

Diversification Opportunities for IShares Asia and BB Biotech

-0.31

Correlation Coefficient

IShares Asia  BB Biotech

Very good diversification

The 3 months correlation between IShares and BION is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia Property 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 IShares Asia 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 iShares Asia Property 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 IShares Asia i.e., IShares Asia and BB Biotech go up and down completely randomly.

Pair Corralation between IShares Asia and BB Biotech

Assuming the 90 days trading horizon iShares Asia Property is expected to generate 0.58 times more return on investment than BB Biotech. However, iShares Asia Property is 1.71 times less risky than BB Biotech. It trades about -0.18 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.25 per unit of risk. If you would invest  1,951  in iShares Asia Property on September 13, 2024 and sell it today you would lose (53.00) from holding iShares Asia Property or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

iShares Asia Property  vs.  BB Biotech AG

iShares Asia Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Asia Property has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

BB Biotech AG

Risk-Adjusted Performance

0 of 100

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 IShares Asia and BB Biotech

The main advantage of trading using opposite IShares Asia and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Asia 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 iShares Asia Property 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.