Correlation Between BB Biotech and Magna International

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

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

Diversification Opportunities for BB Biotech and Magna International

0.74

Correlation Coefficient

BB Biotech  Magna International

Poor diversification

The 3 months correlation between BBZA and Magna is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BB Biotech AG and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and BB Biotech 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 BB Biotech AG are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of BB Biotech i.e., BB Biotech and Magna International go up and down completely randomly.

Pair Corralation between BB Biotech and Magna International

Assuming the 90 days trading horizon BB Biotech is expected to generate 1.54 times less return on investment than Magna International. But when comparing it to its historical volatility, BB Biotech AG is 1.44 times less risky than Magna International. It trades about 0.05 of its potential returns per unit of risk. Magna International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,047  in Magna International on April 3, 2025 and sell it today you would earn a total of  215.00  from holding Magna International or generate 7.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

BB Biotech AG  vs.  Magna International

BB Biotech AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BB Biotech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Magna International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BB Biotech and Magna International

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

The idea behind BB Biotech AG and Magna International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.