Correlation Between SK Bioscience and ABL Bio

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

By analyzing existing cross correlation between SK Bioscience Co and ABL Bio, you can compare the effects of market volatilities on SK Bioscience and ABL Bio 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 SK Bioscience with a short position of ABL Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Bioscience and ABL Bio.

Diversification Opportunities for SK Bioscience and ABL Bio

-0.13

Correlation Coefficient

SK Bioscience  ABL Bio

Good diversification

The 3 months correlation between 302440 and ABL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SK Bioscience Co and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio and SK Bioscience 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 SK Bioscience Co are associated (or correlated) with ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of SK Bioscience i.e., SK Bioscience and ABL Bio go up and down completely randomly.

Pair Corralation between SK Bioscience and ABL Bio

Assuming the 90 days trading horizon SK Bioscience Co is expected to under-perform the ABL Bio. But the stock apears to be less risky and, when comparing its historical volatility, SK Bioscience Co is 1.29 times less risky than ABL Bio. The stock trades about -0.03 of its potential returns per unit of risk. The ABL Bio is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,760,000  in ABL Bio on December 2, 2024 and sell it today you would earn a total of  1,275,000  from holding ABL Bio or generate 46.2% return on investment over 90 days.

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

SK Bioscience Co  vs.  ABL Bio

SK Bioscience

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK Bioscience Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ABL Bio

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABL Bio are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABL Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Bioscience and ABL Bio

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

The idea behind SK Bioscience Co and ABL Bio 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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.