Correlation Between Brickell Biotech and Bridgebio Pharma

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Can any of the company-specific risk be diversified away by investing in both Brickell Biotech and Bridgebio 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 Brickell Biotech and Bridgebio Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brickell Biotech and Bridgebio Pharma, you can compare the effects of market volatilities on Brickell Biotech and Bridgebio 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 Brickell Biotech with a short position of Bridgebio Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brickell Biotech and Bridgebio Pharma.

Diversification Opportunities for Brickell Biotech and Bridgebio Pharma

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Brickell and Bridgebio is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Brickell Biotech and Bridgebio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgebio Pharma and Brickell 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 Brickell Biotech are associated (or correlated) with Bridgebio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgebio Pharma has no effect on the direction of Brickell Biotech i.e., Brickell Biotech and Bridgebio Pharma go up and down completely randomly.

Pair Corralation between Brickell Biotech and Bridgebio Pharma

Considering the 90-day investment horizon Brickell Biotech is expected to generate 1.36 times more return on investment than Bridgebio Pharma. However, Brickell Biotech is 1.36 times more volatile than Bridgebio Pharma. It trades about -0.02 of its potential returns per unit of risk. Bridgebio Pharma is currently generating about -0.06 per unit of risk. If you would invest  86.00  in Brickell Biotech on March 31, 2022 and sell it today you would lose (62.00)  from holding Brickell Biotech or give up 72.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Brickell Biotech  vs.  Bridgebio Pharma

 Performance (%) 
      Timeline 
Brickell Biotech 
Brickell Performance
0 of 100
Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Brickell Price Channel

Bridgebio Pharma 
Bridgebio Performance
0 of 100
Over the last 90 days Bridgebio Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Bridgebio Pharma is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bridgebio Price Channel

Brickell Biotech and Bridgebio Pharma Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Brickell Biotech and Bridgebio Pharma

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

Bridgebio Pharma

Pair trading matchups for Bridgebio Pharma

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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