Correlation Between Severn Trent and BioLineRx

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

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

Diversification Opportunities for Severn Trent and BioLineRx

0.52

Correlation Coefficient

Severn Trent  BioLineRx

Very weak diversification

The 3 months correlation between Severn and BioLineRx is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Severn Trent PLC and BioLineRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLineRx and Severn Trent 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 Severn Trent PLC are associated (or correlated) with BioLineRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLineRx has no effect on the direction of Severn Trent i.e., Severn Trent and BioLineRx go up and down completely randomly.

Pair Corralation between Severn Trent and BioLineRx

Assuming the 90 days horizon Severn Trent is expected to generate 1.97 times less return on investment than BioLineRx. But when comparing it to its historical volatility, Severn Trent PLC is 3.59 times less risky than BioLineRx. It trades about 0.08 of its potential returns per unit of risk. BioLineRx is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  363.00  in BioLineRx on May 21, 2025 and sell it today you would earn a total of  20.00  from holding BioLineRx or generate 5.51% return on investment over 90 days.

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

Severn Trent PLC  vs.  BioLineRx

Severn Trent PLC

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Severn Trent PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Severn Trent may actually be approaching a critical reversion point that can send shares even higher in September 2025.

BioLineRx

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in BioLineRx are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BioLineRx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Severn Trent and BioLineRx

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

The idea behind Severn Trent PLC and BioLineRx 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.