Correlation Between Zuger Kantonalbank and BB Biotech

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

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

Diversification Opportunities for Zuger Kantonalbank and BB Biotech

0.53

Correlation Coefficient

Zuger Kantonalbank  BB Biotech

Very weak diversification

The 3 months correlation between Zuger and BION is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Zuger Kantonalbank 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 Zuger Kantonalbank 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 Zuger Kantonalbank 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 Zuger Kantonalbank i.e., Zuger Kantonalbank and BB Biotech go up and down completely randomly.

Pair Corralation between Zuger Kantonalbank and BB Biotech

Assuming the 90 days trading horizon Zuger Kantonalbank is expected to generate 0.73 times more return on investment than BB Biotech. However, Zuger Kantonalbank is 1.36 times less risky than BB Biotech. It trades about 0.17 of its potential returns per unit of risk. BB Biotech AG is currently generating about 0.0 per unit of risk. If you would invest  814,000  in Zuger Kantonalbank on December 3, 2024 and sell it today you would earn a total of  78,000  from holding Zuger Kantonalbank or generate 9.58% return on investment over 90 days.

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

Zuger Kantonalbank  vs.  BB Biotech AG

Zuger Kantonalbank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zuger Kantonalbank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Zuger Kantonalbank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BB Biotech AG

Risk-Adjusted Performance

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 Zuger Kantonalbank and BB Biotech

The main advantage of trading using opposite Zuger Kantonalbank and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zuger Kantonalbank 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 Zuger Kantonalbank 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.