Correlation Between Biogen and AbbVie
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
Average diversification
The 3 months correlation between Biogen and AbbVie is 0.18. 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
Assuming the 90 days trading horizon Biogen Inc is expected to under-perform the AbbVie. But the stock apears to be less risky and, when comparing its historical volatility, Biogen Inc is 1.22 times less risky than AbbVie. The stock trades about -0.05 of its potential returns per unit of risk. The AbbVie Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,847 in AbbVie Inc on October 7, 2024 and sell it today you would earn a total of 2,216 from holding AbbVie Inc or generate 45.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Biogen Inc vs. AbbVie Inc
Performance |
| Timeline |
| Biogen Inc |
| AbbVie Inc |
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.| Biogen vs. Nordon Indstrias Metalrgicas | Biogen vs. JB Hunt Transport | Biogen vs. Darden Restaurants, | Biogen vs. Tyson Foods |
| AbbVie vs. Broadridge Financial Solutions, | AbbVie vs. Zebra Technologies | AbbVie vs. Delta Air Lines | AbbVie vs. Take Two Interactive Software |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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