Correlation Between SAB Biotherapeutics and LianBio ADR

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

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

Diversification Opportunities for SAB Biotherapeutics and LianBio ADR

0.03

Correlation Coefficient

SAB Biotherapeutics  LianBio ADR

Significant diversification

The 3 months correlation between SAB and LianBio is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and LianBio ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianBio ADR 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 LianBio ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianBio ADR has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and LianBio ADR go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and LianBio ADR

If you would invest  279.00  in SAB Biotherapeutics on September 13, 2024 and sell it today you would earn a total of  108.00  from holding SAB Biotherapeutics or generate 38.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

SAB Biotherapeutics  vs.  LianBio ADR

SAB Biotherapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, SAB Biotherapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

LianBio ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LianBio ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, LianBio ADR is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SAB Biotherapeutics and LianBio ADR

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

The idea behind SAB Biotherapeutics and LianBio ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.