Correlation Between ABVC Biopharma and Solid Biosciences

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

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

Diversification Opportunities for ABVC Biopharma and Solid Biosciences

-0.5

Correlation Coefficient

ABVC Biopharma  Solid Biosciences

Very good diversification

The 3 months correlation between ABVC and Solid is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ABVC Biopharma and Solid Biosciences LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Biosciences LLC and ABVC Biopharma 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 ABVC Biopharma are associated (or correlated) with Solid Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid Biosciences LLC has no effect on the direction of ABVC Biopharma i.e., ABVC Biopharma and Solid Biosciences go up and down completely randomly.

Pair Corralation between ABVC Biopharma and Solid Biosciences

Given the investment horizon of 90 days ABVC Biopharma is expected to generate 2.58 times more return on investment than Solid Biosciences. However, ABVC Biopharma is 2.58 times more volatile than Solid Biosciences LLC. It trades about 0.06 of its potential returns per unit of risk. Solid Biosciences LLC is currently generating about -0.46 per unit of risk. If you would invest  137.00  in ABVC Biopharma on January 30, 2024 and sell it today you would earn a total of  5.00  from holding ABVC Biopharma or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ABVC Biopharma  vs.  Solid Biosciences LLC

ABVC Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABVC Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ABVC Biopharma is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Solid Biosciences LLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solid Biosciences LLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Solid Biosciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABVC Biopharma and Solid Biosciences

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

The idea behind ABVC Biopharma and Solid Biosciences LLC 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.