Correlation Between BioSenic and TME Pharma

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

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

Diversification Opportunities for BioSenic and TME Pharma

0.63

Correlation Coefficient

BioSenic  TME Pharma

Poor diversification

The 3 months correlation between BioSenic and TME is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BioSenic SA and TME Pharma NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TME Pharma NV and BioSenic 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 BioSenic SA are associated (or correlated) with TME Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TME Pharma NV has no effect on the direction of BioSenic i.e., BioSenic and TME Pharma go up and down completely randomly.

Pair Corralation between BioSenic and TME Pharma

Assuming the 90 days trading horizon BioSenic SA is expected to generate 1.51 times more return on investment than TME Pharma. However, BioSenic is 1.51 times more volatile than TME Pharma NV. It trades about 0.16 of its potential returns per unit of risk. TME Pharma NV is currently generating about 0.18 per unit of risk. If you would invest  0.13  in BioSenic SA on April 24, 2025 and sell it today you would earn a total of  0.11  from holding BioSenic SA or generate 84.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

BioSenic SA  vs.  TME Pharma NV

BioSenic SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BioSenic SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BioSenic reported solid returns over the last few months and may actually be approaching a breakup point.

TME Pharma NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TME Pharma NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, TME Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BioSenic and TME Pharma

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

The idea behind BioSenic SA and TME Pharma NV 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..