Correlation Between Alpine Select and BB Biotech

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Can any of the company-specific risk be diversified away by investing in both Alpine Select 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 Alpine Select and BB Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpine Select AG and BB Biotech AG, you can compare the effects of market volatilities on Alpine Select 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 Alpine Select with a short position of BB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpine Select and BB Biotech.

Diversification Opportunities for Alpine Select and BB Biotech

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Alpine and BION is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Select AG 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 Alpine Select 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 Alpine Select AG 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 Alpine Select i.e., Alpine Select and BB Biotech go up and down completely randomly.

Pair Corralation between Alpine Select and BB Biotech

Assuming the 90 days trading horizon Alpine Select is expected to generate 2.22 times less return on investment than BB Biotech. In addition to that, Alpine Select is 1.08 times more volatile than BB Biotech AG. It trades about 0.03 of its total potential returns per unit of risk. BB Biotech AG is currently generating about 0.08 per unit of volatility. If you would invest  3,640  in BB Biotech AG on August 29, 2024 and sell it today you would earn a total of  90.00  from holding BB Biotech AG or generate 2.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy72.73%
ValuesDaily Returns

Alpine Select AG  vs.  BB Biotech AG

 Performance 
       Timeline  
Alpine Select AG 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Alpine Select AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Alpine Select is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
BB Biotech AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Alpine Select and BB Biotech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alpine Select and BB Biotech

The main advantage of trading using opposite Alpine Select and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpine Select 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 Alpine Select AG 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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