Correlation Between SAB Biotherapeutics and Amylyx Pharmaceuticals

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

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

Diversification Opportunities for SAB Biotherapeutics and Amylyx Pharmaceuticals

0.82

Correlation Coefficient

SAB Biotherapeutics  Amylyx Pharmaceuticals

Very poor diversification

The 3 months correlation between SAB and Amylyx is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and Amylyx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amylyx Pharmaceuticals 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 Amylyx Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amylyx Pharmaceuticals has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and Amylyx Pharmaceuticals go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and Amylyx Pharmaceuticals

Assuming the 90 days horizon SAB Biotherapeutics is expected to generate 24.29 times more return on investment than Amylyx Pharmaceuticals. However, SAB Biotherapeutics is 24.29 times more volatile than Amylyx Pharmaceuticals. It trades about 0.15 of its potential returns per unit of risk. Amylyx Pharmaceuticals is currently generating about 0.29 per unit of risk. If you would invest  2.60  in SAB Biotherapeutics on September 2, 2024 and sell it today you would earn a total of  4.15  from holding SAB Biotherapeutics or generate 159.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	84.38%
Values	Daily Returns

SAB Biotherapeutics  vs.  Amylyx Pharmaceuticals

SAB Biotherapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SAB Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Amylyx Pharmaceuticals

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amylyx Pharmaceuticals are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Amylyx Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAB Biotherapeutics and Amylyx Pharmaceuticals

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

The idea behind SAB Biotherapeutics and Amylyx Pharmaceuticals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .