Correlation Between SAB Biotherapeutics and FWBI Old

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

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

Diversification Opportunities for SAB Biotherapeutics and FWBI Old

-0.65

Correlation Coefficient

SAB Biotherapeutics  FWBI Old

Excellent diversification

The 3 months correlation between SAB and FWBI is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and FWBI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FWBI Old 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 FWBI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FWBI Old has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and FWBI Old go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and FWBI Old

Given the investment horizon of 90 days SAB Biotherapeutics is expected to generate 1.04 times more return on investment than FWBI Old. However, SAB Biotherapeutics is 1.04 times more volatile than FWBI Old. It trades about 0.02 of its potential returns per unit of risk. FWBI Old is currently generating about -0.17 per unit of risk. If you would invest  703.00  in SAB Biotherapeutics on October 10, 2024 and sell it today you would lose (323.00) from holding SAB Biotherapeutics or give up 45.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	26.06%
Values	Daily Returns

SAB Biotherapeutics  vs.  FWBI Old

SAB Biotherapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 8 (%) 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.

FWBI Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FWBI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, FWBI Old is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SAB Biotherapeutics and FWBI Old

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

The idea behind SAB Biotherapeutics and FWBI Old 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.