Correlation Between Algernon Pharmaceuticals and SAB Biotherapeutics

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

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

Diversification Opportunities for Algernon Pharmaceuticals and SAB Biotherapeutics

-0.54

Correlation Coefficient

Algernon Pharmaceuticals  SAB Biotherapeutics

Excellent diversification

The 3 months correlation between Algernon and SAB is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Algernon Pharmaceuticals and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Algernon Pharmaceuticals 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 Algernon Pharmaceuticals are associated (or correlated) with SAB Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAB Biotherapeutics has no effect on the direction of Algernon Pharmaceuticals i.e., Algernon Pharmaceuticals and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Algernon Pharmaceuticals and SAB Biotherapeutics

Assuming the 90 days horizon Algernon Pharmaceuticals is expected to generate 1.53 times less return on investment than SAB Biotherapeutics. In addition to that, Algernon Pharmaceuticals is 1.24 times more volatile than SAB Biotherapeutics. It trades about 0.01 of its total potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.02 per unit of volatility. If you would invest  702.00  in SAB Biotherapeutics on October 12, 2024 and sell it today you would lose (318.00) from holding SAB Biotherapeutics or give up 45.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Algernon Pharmaceuticals  vs.  SAB Biotherapeutics

Algernon Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

SAB Biotherapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, SAB Biotherapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algernon Pharmaceuticals and SAB Biotherapeutics

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

The idea behind Algernon Pharmaceuticals and SAB Biotherapeutics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.