Correlation Between Mustang Bio and SAB Biotherapeutics

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

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

Diversification Opportunities for Mustang Bio and SAB Biotherapeutics

-0.31

Correlation Coefficient

Mustang Bio  SAB Biotherapeutics

Very good diversification

The 3 months correlation between Mustang and SAB is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Mustang Bio 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 Mustang Bio 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 Mustang Bio i.e., Mustang Bio and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Mustang Bio and SAB Biotherapeutics

Given the investment horizon of 90 days Mustang Bio is expected to generate 15.02 times less return on investment than SAB Biotherapeutics. But when comparing it to its historical volatility, Mustang Bio is 4.46 times less risky than SAB Biotherapeutics. It trades about 0.05 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  4.00  in SAB Biotherapeutics on October 9, 2024 and sell it today you would earn a total of  4.50  from holding SAB Biotherapeutics or generate 112.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.45%
Values	Daily Returns

Mustang Bio  vs.  SAB Biotherapeutics

Mustang Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mustang Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Mustang Bio is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 Mustang Bio and SAB Biotherapeutics

The main advantage of trading using opposite Mustang Bio and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustang Bio 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 Mustang Bio 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.