Correlation Between SAB Biotherapeutics and KTRA Old

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

Diversification Opportunities for SAB Biotherapeutics and KTRA Old

-0.2

Correlation Coefficient

SAB Biotherapeutics  KTRA Old

Good diversification

The 3 months correlation between SAB and KTRA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and KTRA Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTRA 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 KTRA Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTRA Old has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and KTRA Old go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and KTRA Old

Given the investment horizon of 90 days SAB Biotherapeutics is expected to generate 12.83 times less return on investment than KTRA Old. But when comparing it to its historical volatility, SAB Biotherapeutics is 6.17 times less risky than KTRA Old. It trades about 0.02 of its potential returns per unit of risk. KTRA Old is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  22,190  in KTRA Old on October 11, 2024 and sell it today you would lose (21,560) from holding KTRA Old or give up 97.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.91%
Values	Daily Returns

SAB Biotherapeutics  vs.  KTRA Old

SAB Biotherapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 10 (%) 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.

KTRA Old

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days KTRA Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, KTRA Old sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAB Biotherapeutics and KTRA Old

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

The idea behind SAB Biotherapeutics and KTRA 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.