Correlation Between Cingulate and SAB Biotherapeutics

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

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

Diversification Opportunities for Cingulate and SAB Biotherapeutics

0.24

Correlation Coefficient

Cingulate  SAB Biotherapeutics

Modest diversification

The 3 months correlation between Cingulate and SAB is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cingulate and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Cingulate 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 Cingulate 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 Cingulate i.e., Cingulate and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Cingulate and SAB Biotherapeutics

Given the investment horizon of 90 days Cingulate is expected to generate 15.09 times less return on investment than SAB Biotherapeutics. But when comparing it to its historical volatility, Cingulate is 5.82 times less risky than SAB Biotherapeutics. It trades about 0.07 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5.00  in SAB Biotherapeutics on October 26, 2024 and sell it today you would earn a total of  7.00  from holding SAB Biotherapeutics or generate 140.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.22%
Values	Daily Returns

Cingulate  vs.  SAB Biotherapeutics

Cingulate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cingulate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cingulate reported solid returns over the last few months and may actually be approaching a breakup point.

SAB Biotherapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, SAB Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cingulate and SAB Biotherapeutics

The main advantage of trading using opposite Cingulate and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cingulate 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 Cingulate 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.