Correlation Between Schweizerische Nationalbank and BB Biotech
Can any of the company-specific risk be diversified away by investing in both Schweizerische Nationalbank 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 Schweizerische Nationalbank and BB Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schweizerische Nationalbank and BB Biotech AG, you can compare the effects of market volatilities on Schweizerische Nationalbank 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 Schweizerische Nationalbank with a short position of BB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schweizerische Nationalbank and BB Biotech.
Diversification Opportunities for Schweizerische Nationalbank and BB Biotech
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Schweizerische and BION is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Schweizerische Nationalbank 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 Schweizerische Nationalbank 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 Schweizerische Nationalbank 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 Schweizerische Nationalbank i.e., Schweizerische Nationalbank and BB Biotech go up and down completely randomly.
Pair Corralation between Schweizerische Nationalbank and BB Biotech
Assuming the 90 days trading horizon Schweizerische Nationalbank is expected to under-perform the BB Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Schweizerische Nationalbank is 1.05 times less risky than BB Biotech. The stock trades about -0.1 of its potential returns per unit of risk. The BB Biotech AG is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 3,840 in BB Biotech AG on November 27, 2024 and sell it today you would lose (95.00) from holding BB Biotech AG or give up 2.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schweizerische Nationalbank vs. BB Biotech AG
Performance |
| Timeline |
| Schweizerische Nationalbank |
| BB Biotech AG |
Schweizerische Nationalbank and BB Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schweizerische Nationalbank and BB Biotech
The main advantage of trading using opposite Schweizerische Nationalbank and BB Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schweizerische Nationalbank 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.The idea behind Schweizerische Nationalbank and BB Biotech AG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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