Correlation Between Roche Holding and Biogen

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

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

Diversification Opportunities for Roche Holding and Biogen

-0.59

Correlation Coefficient

Roche Holding  Biogen

Excellent diversification

The 3 months correlation between Roche and Biogen is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding Ltd and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Roche Holding 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 Roche Holding Ltd 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 Roche Holding i.e., Roche Holding and Biogen go up and down completely randomly.

Pair Corralation between Roche Holding and Biogen

Assuming the 90 days horizon Roche Holding Ltd is expected to generate 0.79 times more return on investment than Biogen. However, Roche Holding Ltd is 1.26 times less risky than Biogen. It trades about 0.23 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.04 per unit of risk. If you would invest  3,516  in Roche Holding Ltd on December 28, 2024 and sell it today you would earn a total of  733.00  from holding Roche Holding Ltd or generate 20.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Roche Holding Ltd  vs.  Biogen Inc

Roche Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roche Holding Ltd are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Roche Holding showed solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong forward indicators, Biogen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Roche Holding and Biogen

The main advantage of trading using opposite Roche Holding and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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 Roche Holding Ltd 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.