Correlation Between LianBio ADR and SAB Biotherapeutics

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

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

Diversification Opportunities for LianBio ADR and SAB Biotherapeutics

0.03

Correlation Coefficient

LianBio ADR  SAB Biotherapeutics

Significant diversification

The 3 months correlation between LianBio and SAB is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding LianBio ADR and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and LianBio ADR 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 LianBio ADR 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 LianBio ADR i.e., LianBio ADR and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between LianBio ADR and SAB Biotherapeutics

If you would invest  342.00  in SAB Biotherapeutics on September 13, 2024 and sell it today you would earn a total of  45.00  from holding SAB Biotherapeutics or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

LianBio ADR  vs.  SAB Biotherapeutics

LianBio ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LianBio ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, LianBio ADR is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SAB Biotherapeutics

Risk-Adjusted Performance

7 of 100

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 comparatively inconsistent fundamental drivers, SAB Biotherapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LianBio ADR and SAB Biotherapeutics

The main advantage of trading using opposite LianBio ADR and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LianBio ADR 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 LianBio ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.