Correlation Between Biogen and FibroGen
Can any of the company-specific risk be diversified away by investing in both Biogen and FibroGen 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 Biogen and FibroGen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biogen Inc and FibroGen, you can compare the effects of market volatilities on Biogen and FibroGen 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 Biogen with a short position of FibroGen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biogen and FibroGen.
Diversification Opportunities for Biogen and FibroGen
Excellent diversification
The 3 months correlation between Biogen and FibroGen is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Biogen Inc and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Biogen 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 Biogen Inc are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Biogen i.e., Biogen and FibroGen go up and down completely randomly.
Pair Corralation between Biogen and FibroGen
Assuming the 90 days trading horizon Biogen Inc is expected to generate 0.2 times more return on investment than FibroGen. However, Biogen Inc is 5.03 times less risky than FibroGen. It trades about -0.06 of its potential returns per unit of risk. FibroGen is currently generating about -0.02 per unit of risk. If you would invest 496,150 in Biogen Inc on November 27, 2024 and sell it today you would lose (217,650) from holding Biogen Inc or give up 43.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biogen Inc vs. FibroGen
Performance |
| Timeline |
| Biogen Inc |
| FibroGen |
Biogen and FibroGen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biogen and FibroGen
The main advantage of trading using opposite Biogen and FibroGen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biogen position performs unexpectedly, FibroGen 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 FibroGen will offset losses from the drop in FibroGen's long position.| Biogen vs. Burlington Stores | Biogen vs. Hoteles City Express | Biogen vs. Ross Stores | Biogen vs. Southern Copper |
| FibroGen vs. FIBRA Storage | FibroGen vs. New Oriental Education | FibroGen vs. Delta Air Lines | FibroGen vs. First Republic Bank |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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