Correlation Between SAB Biotherapeutics and Aileron Therapeutics

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

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

Diversification Opportunities for SAB Biotherapeutics and Aileron Therapeutics

0.25

Correlation Coefficient

SAB Biotherapeutics  Aileron Therapeutics

Modest diversification

The 3 months correlation between SAB and Aileron is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and Aileron Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aileron Therapeutics and SAB Biotherapeutics 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 SAB Biotherapeutics are associated (or correlated) with Aileron Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aileron Therapeutics has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and Aileron Therapeutics go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and Aileron Therapeutics

Given the investment horizon of 90 days SAB Biotherapeutics is expected to generate 1.29 times more return on investment than Aileron Therapeutics. However, SAB Biotherapeutics is 1.29 times more volatile than Aileron Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Aileron Therapeutics is currently generating about 0.04 per unit of risk. If you would invest  293.00  in SAB Biotherapeutics on September 2, 2024 and sell it today you would lose (1.00) from holding SAB Biotherapeutics or give up 0.34% of portfolio value over 90 days.

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

SAB Biotherapeutics  vs.  Aileron Therapeutics

SAB Biotherapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 2 (%) 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.

Aileron Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aileron Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Aileron Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAB Biotherapeutics and Aileron Therapeutics

The main advantage of trading using opposite SAB Biotherapeutics and Aileron Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAB Biotherapeutics position performs unexpectedly, Aileron Therapeutics 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 Aileron Therapeutics will offset losses from the drop in Aileron Therapeutics' long position.

The idea behind SAB Biotherapeutics and Aileron Therapeutics 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.