Correlation Between BioNTech and CSL

Can any of the company-specific risk be diversified away by investing in both BioNTech and CSL 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 BioNTech and CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BioNTech SE and CSL, you can compare the effects of market volatilities on BioNTech and CSL 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 BioNTech with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BioNTech and CSL.

Diversification Opportunities for BioNTech and CSL

0.71

Correlation Coefficient

BioNTech  CSL

Poor diversification

The 3 months correlation between BioNTech and CSL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BioNTech SE and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and BioNTech 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 BioNTech SE are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of BioNTech i.e., BioNTech and CSL go up and down completely randomly.

Pair Corralation between BioNTech and CSL

Given the investment horizon of 90 days BioNTech SE is expected to under-perform the CSL. But the stock apears to be less risky and, when comparing its historical volatility, BioNTech SE is 1.03 times less risky than CSL. The stock trades about -0.17 of its potential returns per unit of risk. The CSL is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  9,231  in CSL on January 26, 2024 and sell it today you would lose (221.00) from holding CSL or give up 2.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BioNTech SE  vs.  CSL

BioNTech SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BioNTech SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, CSL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BioNTech and CSL

The main advantage of trading using opposite BioNTech and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BioNTech position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.

The idea behind BioNTech SE and CSL 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.