Correlation Between CSL and BB Biotech
Can any of the company-specific risk be diversified away by investing in both CSL 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 CSL and BB Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL Limited and BB Biotech AG, you can compare the effects of market volatilities on CSL 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 CSL with a short position of BB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and BB Biotech.
Diversification Opportunities for CSL and BB Biotech
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CSL and BBZA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited 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 CSL 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 CSL Limited 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 CSL i.e., CSL and BB Biotech go up and down completely randomly.
Pair Corralation between CSL and BB Biotech
Assuming the 90 days horizon CSL Limited is expected to generate 0.7 times more return on investment than BB Biotech. However, CSL Limited is 1.42 times less risky than BB Biotech. It trades about 0.01 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.05 per unit of risk. If you would invest 16,787 in CSL Limited on August 25, 2024 and sell it today you would earn a total of 9.00 from holding CSL Limited or generate 0.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL Limited vs. BB Biotech AG
Performance |
| Timeline |
| CSL Limited |
| BB Biotech AG |
CSL and BB Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and BB Biotech
The main advantage of trading using opposite CSL and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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.| CSL vs. United Breweries Co | CSL vs. Monster Beverage Corp | CSL vs. Columbia Sportswear | CSL vs. COLUMBIA SPORTSWEAR |
| BB Biotech vs. CSL Limited | BB Biotech vs. Superior Plus Corp | BB Biotech vs. NMI Holdings | BB Biotech vs. Origin Agritech |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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