Correlation Between SAB Biotherapeutics and Regeneron Pharmaceuticals

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

Diversification Opportunities for SAB Biotherapeutics and Regeneron Pharmaceuticals

0.08

Correlation Coefficient

SAB Biotherapeutics  Regeneron Pharmaceuticals

Significant diversification

The 3 months correlation between SAB and Regeneron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and Regeneron Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regeneron 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 Regeneron Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regeneron Pharmaceuticals has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and Regeneron Pharmaceuticals go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and Regeneron Pharmaceuticals

Assuming the 90 days horizon SAB Biotherapeutics is expected to generate 10.56 times more return on investment than Regeneron Pharmaceuticals. However, SAB Biotherapeutics is 10.56 times more volatile than Regeneron Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Regeneron Pharmaceuticals is currently generating about -0.07 per unit of risk. If you would invest  7.74  in SAB Biotherapeutics on December 29, 2024 and sell it today you would lose (4.25) from holding SAB Biotherapeutics or give up 54.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

SAB Biotherapeutics  vs.  Regeneron Pharmaceuticals

SAB Biotherapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 3 (%) 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.

Regeneron Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regeneron Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SAB Biotherapeutics and Regeneron Pharmaceuticals

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

The idea behind SAB Biotherapeutics and Regeneron 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.