Correlation Between Kane Biotech and SAB Biotherapeutics

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

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

Diversification Opportunities for Kane Biotech and SAB Biotherapeutics

-0.52

Correlation Coefficient

Kane Biotech  SAB Biotherapeutics

Excellent diversification

The 3 months correlation between Kane and SAB is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kane Biotech and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Kane Biotech 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 Kane Biotech 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 Kane Biotech i.e., Kane Biotech and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Kane Biotech and SAB Biotherapeutics

Assuming the 90 days horizon Kane Biotech is expected to generate 1.09 times less return on investment than SAB Biotherapeutics. But when comparing it to its historical volatility, Kane Biotech is 1.41 times less risky than SAB Biotherapeutics. It trades about 0.03 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  650.00  in SAB Biotherapeutics on September 24, 2024 and sell it today you would lose (185.00) from holding SAB Biotherapeutics or give up 28.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Kane Biotech  vs.  SAB Biotherapeutics

Kane Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kane 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 forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Kane Biotech and SAB Biotherapeutics

The main advantage of trading using opposite Kane Biotech and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kane Biotech 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 Kane Biotech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.