Correlation Between Basilea Pharmaceutica and Therapeutic Solutions
Can any of the company-specific risk be diversified away by investing in both Basilea Pharmaceutica and Therapeutic Solutions 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 Basilea Pharmaceutica and Therapeutic Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basilea Pharmaceutica AG and Therapeutic Solutions International, you can compare the effects of market volatilities on Basilea Pharmaceutica and Therapeutic Solutions 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 Basilea Pharmaceutica with a short position of Therapeutic Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basilea Pharmaceutica and Therapeutic Solutions.
Diversification Opportunities for Basilea Pharmaceutica and Therapeutic Solutions
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basilea and Therapeutic is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Basilea Pharmaceutica AG and Therapeutic Solutions Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therapeutic Solutions and Basilea Pharmaceutica 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 Basilea Pharmaceutica AG are associated (or correlated) with Therapeutic Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therapeutic Solutions has no effect on the direction of Basilea Pharmaceutica i.e., Basilea Pharmaceutica and Therapeutic Solutions go up and down completely randomly.
Pair Corralation between Basilea Pharmaceutica and Therapeutic Solutions
Assuming the 90 days horizon Basilea Pharmaceutica is expected to generate 11.19 times less return on investment than Therapeutic Solutions. But when comparing it to its historical volatility, Basilea Pharmaceutica AG is 8.08 times less risky than Therapeutic Solutions. It trades about 0.02 of its potential returns per unit of risk. Therapeutic Solutions International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.14 in Therapeutic Solutions International on September 12, 2024 and sell it today you would lose (0.09) from holding Therapeutic Solutions International or give up 64.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
Basilea Pharmaceutica AG vs. Therapeutic Solutions Internat
Performance |
| Timeline |
| Basilea Pharmaceutica |
| Therapeutic Solutions |
Basilea Pharmaceutica and Therapeutic Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basilea Pharmaceutica and Therapeutic Solutions
The main advantage of trading using opposite Basilea Pharmaceutica and Therapeutic Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basilea Pharmaceutica position performs unexpectedly, Therapeutic Solutions 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 Therapeutic Solutions will offset losses from the drop in Therapeutic Solutions' long position.The idea behind Basilea Pharmaceutica AG and Therapeutic Solutions International 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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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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