Correlation Between ABB and Bachem Holding

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

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

Diversification Opportunities for ABB and Bachem Holding

0.64

Correlation Coefficient

ABB  Bachem Holding

Poor diversification

The 3 months correlation between ABB and Bachem is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Bachem Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bachem Holding AG and ABB 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 ABB are associated (or correlated) with Bachem Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bachem Holding AG has no effect on the direction of ABB i.e., ABB and Bachem Holding go up and down completely randomly.

Pair Corralation between ABB and Bachem Holding

Assuming the 90 days trading horizon ABB is expected to generate 0.94 times more return on investment than Bachem Holding. However, ABB is 1.06 times less risky than Bachem Holding. It trades about 0.18 of its potential returns per unit of risk. Bachem Holding AG is currently generating about 0.14 per unit of risk. If you would invest  4,325  in ABB on April 25, 2025 and sell it today you would earn a total of  947.00  from holding ABB or generate 21.9% return on investment over 90 days.

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

ABB  vs.  Bachem Holding AG

ABB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ABB showed solid returns over the last few months and may actually be approaching a breakup point.

Bachem Holding AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bachem Holding AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bachem Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABB and Bachem Holding

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

The idea behind ABB and Bachem Holding 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.