Correlation Between Biogen and TCM
Can any of the company-specific risk be diversified away by investing in both Biogen and TCM 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 TCM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biogen Inc and TCM Group, you can compare the effects of market volatilities on Biogen and TCM 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 TCM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biogen and TCM.
Diversification Opportunities for Biogen and TCM
Very weak diversification
The 3 months correlation between Biogen and TCM is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Biogen Inc and TCM Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCM Group 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 TCM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCM Group has no effect on the direction of Biogen i.e., Biogen and TCM go up and down completely randomly.
Pair Corralation between Biogen and TCM
Given the investment horizon of 90 days Biogen Inc is expected to generate 0.93 times more return on investment than TCM. However, Biogen Inc is 1.08 times less risky than TCM. It trades about 0.01 of its potential returns per unit of risk. TCM Group is currently generating about -0.04 per unit of risk. If you would invest 20,118 in Biogen Inc on January 25, 2024 and sell it today you would lose (800.00) from holding Biogen Inc or give up 3.98% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.8% |
Values | Daily Returns |
Biogen Inc vs. TCM Group
Performance |
Timeline |
Biogen Inc |
TCM Group |
Biogen and TCM Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Biogen and TCM
The main advantage of trading using opposite Biogen and TCM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biogen position performs unexpectedly, TCM 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 TCM will offset losses from the drop in TCM's long position.Biogen vs. Bristol Myers Squibb | Biogen vs. AbbVie Inc | Biogen vs. Merck Company | Biogen vs. Gilead Sciences |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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