Correlation Between X FAB and BB Biotech

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

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

Diversification Opportunities for X FAB and BB Biotech

-0.08

Correlation Coefficient

X FAB  BB Biotech

Good diversification

The 3 months correlation between XFB and BBZA is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries 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 X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and BB Biotech go up and down completely randomly.

Pair Corralation between X FAB and BB Biotech

If you would invest  0.00  in X FAB Silicon Foundries on October 25, 2024 and sell it today you would earn a total of  0.00  from holding X FAB Silicon Foundries or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

X FAB Silicon Foundries  vs.  BB Biotech AG

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, X FAB unveiled solid returns over the last few months and may actually be approaching a breakup point.

BB Biotech AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BB Biotech is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with X FAB and BB Biotech

The main advantage of trading using opposite X FAB and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.