Correlation Between Purple Biotech and SAB Biotherapeutics

Can any of the company-specific risk be diversified away by investing in both Purple 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 Purple 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 Purple Biotech and SAB Biotherapeutics, you can compare the effects of market volatilities on Purple 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 Purple Biotech with a short position of SAB Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Purple Biotech and SAB Biotherapeutics.

Diversification Opportunities for Purple Biotech and SAB Biotherapeutics

0.83

Correlation Coefficient

Purple Biotech  SAB Biotherapeutics

Very poor diversification

The 3 months correlation between Purple and SAB is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Purple Biotech and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Purple 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 Purple 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 Purple Biotech i.e., Purple Biotech and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Purple Biotech and SAB Biotherapeutics

Given the investment horizon of 90 days Purple Biotech is expected to generate 0.48 times more return on investment than SAB Biotherapeutics. However, Purple Biotech is 2.07 times less risky than SAB Biotherapeutics. It trades about -0.1 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about -0.14 per unit of risk. If you would invest  370.00  in Purple Biotech on December 21, 2024 and sell it today you would lose (94.00) from holding Purple Biotech or give up 25.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Purple Biotech  vs.  SAB Biotherapeutics

Purple Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Purple Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SAB Biotherapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAB Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Purple Biotech and SAB Biotherapeutics

The main advantage of trading using opposite Purple Biotech and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Purple 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 Purple 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.