Correlation Between Esperion Therapeutics and SAB Biotherapeutics

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

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

Diversification Opportunities for Esperion Therapeutics and SAB Biotherapeutics

0.15

Correlation Coefficient

Esperion Therapeutics  SAB Biotherapeutics

Average diversification

The 3 months correlation between Esperion and SAB is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Esperion Therapeutics 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 Esperion Therapeutics 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 Esperion Therapeutics i.e., Esperion Therapeutics and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and SAB Biotherapeutics

Given the investment horizon of 90 days Esperion Therapeutics is expected to under-perform the SAB Biotherapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Esperion Therapeutics is 6.1 times less risky than SAB Biotherapeutics. The stock trades about -0.13 of its potential returns per unit of risk. The SAB Biotherapeutics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.75  in SAB Biotherapeutics on November 29, 2024 and sell it today you would lose (3.80) from holding SAB Biotherapeutics or give up 56.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Esperion Therapeutics  vs.  SAB Biotherapeutics

Esperion Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

SAB Biotherapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 7 (%) 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 Esperion Therapeutics and SAB Biotherapeutics

The main advantage of trading using opposite Esperion Therapeutics and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics 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 Esperion Therapeutics 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.