Correlation Between Lem Holding and BB Biotech

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

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

Diversification Opportunities for Lem Holding and BB Biotech

0.81

Correlation Coefficient

Lem Holding  BB Biotech

Very poor diversification

The 3 months correlation between Lem and BION is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lem Holding SA and BB Biotech AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Biotech AG and Lem Holding 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 Lem Holding SA are associated (or correlated) with BB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Biotech AG has no effect on the direction of Lem Holding i.e., Lem Holding and BB Biotech go up and down completely randomly.

Pair Corralation between Lem Holding and BB Biotech

Assuming the 90 days trading horizon Lem Holding SA is expected to generate 1.34 times more return on investment than BB Biotech. However, Lem Holding is 1.34 times more volatile than BB Biotech AG. It trades about 0.25 of its potential returns per unit of risk. BB Biotech AG is currently generating about 0.15 per unit of risk. If you would invest  65,800  in Lem Holding SA on April 23, 2025 and sell it today you would earn a total of  22,900  from holding Lem Holding SA or generate 34.8% return on investment over 90 days.

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

Lem Holding SA  vs.  BB Biotech AG

Lem Holding SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lem Holding SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lem Holding showed solid returns over the last few months and may actually be approaching a breakup point.

BB Biotech AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BB Biotech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lem Holding and BB Biotech

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

The idea behind Lem Holding SA and BB Biotech 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 CEOs Directory module to screen CEOs from public companies around the world.