Correlation Between SAB Biotherapeutics and Avantor

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

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

Diversification Opportunities for SAB Biotherapeutics and Avantor

0.82

Correlation Coefficient

SAB Biotherapeutics  Avantor

Very poor diversification

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

Pair Corralation between SAB Biotherapeutics and Avantor

Assuming the 90 days horizon SAB Biotherapeutics is expected to generate 7.82 times more return on investment than Avantor. However, SAB Biotherapeutics is 7.82 times more volatile than Avantor. It trades about 0.02 of its potential returns per unit of risk. Avantor is currently generating about -0.14 per unit of risk. If you would invest  7.74  in SAB Biotherapeutics on December 28, 2024 and sell it today you would lose (5.16) from holding SAB Biotherapeutics or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	91.67%
Values	Daily Returns

SAB Biotherapeutics  vs.  Avantor

SAB Biotherapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, SAB Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Avantor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with SAB Biotherapeutics and Avantor

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

The idea behind SAB Biotherapeutics and Avantor 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 Transaction History module to view history of all your transactions and understand their impact on performance.