Correlation Between Biogen and AbbVie

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

Diversification Opportunities for Biogen and AbbVie

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Biogen and AbbVie is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Biogen Inc and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Biogen i.e., Biogen and AbbVie go up and down completely randomly.

Pair Corralation between Biogen and AbbVie

Given the investment horizon of 90 days Biogen Inc is expected to under-perform the AbbVie. In addition to that, Biogen is 1.19 times more volatile than AbbVie Inc. It trades about -0.07 of its total potential returns per unit of risk. AbbVie Inc is currently generating about -0.05 per unit of volatility. If you would invest  17,776  in AbbVie Inc on November 2, 2024 and sell it today you would lose (250.00) from holding AbbVie Inc or give up 1.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Biogen Inc  vs.  AbbVie Inc

 Performance 
       Timeline  
Biogen Inc 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
AbbVie Inc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Biogen and AbbVie Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Biogen and AbbVie

The main advantage of trading using opposite Biogen and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biogen position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.
The idea behind Biogen Inc and AbbVie 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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