Correlation Between Sana Biotechnology and Royalty Pharma

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

By analyzing existing cross correlation between Sana Biotechnology and Royalty Pharma Plc, you can compare the effects of market volatilities on Sana Biotechnology and Royalty Pharma 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 Sana Biotechnology with a short position of Royalty Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sana Biotechnology and Royalty Pharma.

Diversification Opportunities for Sana Biotechnology and Royalty Pharma

0.16

Correlation Coefficient

Sana Biotechnology  Royalty Pharma

Average diversification

The 3 months correlation between Sana and Royalty is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sana Biotechnology and Royalty Pharma Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Pharma Plc and Sana Biotechnology 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 Sana Biotechnology are associated (or correlated) with Royalty Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Pharma Plc has no effect on the direction of Sana Biotechnology i.e., Sana Biotechnology and Royalty Pharma go up and down completely randomly.

Pair Corralation between Sana Biotechnology and Royalty Pharma

Given the investment horizon of 90 days Sana Biotechnology is expected to generate 10.7 times more return on investment than Royalty Pharma. However, Sana Biotechnology is 10.7 times more volatile than Royalty Pharma Plc. It trades about 0.06 of its potential returns per unit of risk. Royalty Pharma Plc is currently generating about 0.19 per unit of risk. If you would invest  161.00  in Sana Biotechnology on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Sana Biotechnology or generate 6.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sana Biotechnology  vs.  Royalty Pharma Plc

Sana Biotechnology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sana Biotechnology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sana Biotechnology sustained solid returns over the last few months and may actually be approaching a breakup point.

Royalty Pharma Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Pharma Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Royalty Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sana Biotechnology and Royalty Pharma

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

The idea behind Sana Biotechnology and Royalty Pharma Plc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.