Correlation Between Bridgebio Pharma and Brickell Biotech

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

Diversification Opportunities for Bridgebio Pharma and Brickell Biotech

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bridgebio and Brickell is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bridgebio Pharma and Brickell Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickell Biotech and Bridgebio Pharma 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 Bridgebio Pharma are associated (or correlated) with Brickell Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickell Biotech has no effect on the direction of Bridgebio Pharma i.e., Bridgebio Pharma and Brickell Biotech go up and down completely randomly.

Pair Corralation between Bridgebio Pharma and Brickell Biotech

Given the investment horizon of 90 days Bridgebio Pharma is expected to generate 1.21 times more return on investment than Brickell Biotech. However, Bridgebio Pharma is 1.21 times more volatile than Brickell Biotech. It trades about -0.11 of its potential returns per unit of risk. Brickell Biotech is currently generating about -0.42 per unit of risk. If you would invest  1,002  in Bridgebio Pharma on February 21, 2022 and sell it today you would lose (241.00)  from holding Bridgebio Pharma or give up 24.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bridgebio Pharma  vs.  Brickell Biotech

 Performance (%) 
      Timeline 
Bridgebio Pharma 
Bridgebio Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bridgebio Pharma are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile forward indicators, Bridgebio Pharma may actually be approaching a critical reversion point that can send shares even higher in June 2022.

Bridgebio Price Channel

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 fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Brickell Price Channel

Bridgebio Pharma and Brickell Biotech Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Bridgebio Pharma and Brickell Biotech

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

Bridgebio Pharma

Pair trading matchups for Bridgebio Pharma

The idea behind Bridgebio Pharma and Brickell Biotech 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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