Correlation Between Wesana Health and SAB Biotherapeutics

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

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

Diversification Opportunities for Wesana Health and SAB Biotherapeutics

0.23

Correlation Coefficient

Wesana Health  SAB Biotherapeutics

Modest diversification

The 3 months correlation between Wesana and SAB is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Wesana Health Holdings and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Wesana Health 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 Wesana Health Holdings are associated (or correlated) with SAB Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAB Biotherapeutics has no effect on the direction of Wesana Health i.e., Wesana Health and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Wesana Health and SAB Biotherapeutics

Assuming the 90 days horizon Wesana Health Holdings is expected to generate 7.92 times more return on investment than SAB Biotherapeutics. However, Wesana Health is 7.92 times more volatile than SAB Biotherapeutics. It trades about 0.28 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.18 per unit of risk. If you would invest  0.62  in Wesana Health Holdings on September 25, 2024 and sell it today you would earn a total of  1.58  from holding Wesana Health Holdings or generate 254.84% return on investment over 90 days.

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

Wesana Health Holdings  vs.  SAB Biotherapeutics

Wesana Health Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wesana Health Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wesana Health reported solid returns over the last few months and may actually be approaching a breakup point.

SAB Biotherapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, SAB Biotherapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wesana Health and SAB Biotherapeutics

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

The idea behind Wesana Health Holdings and SAB Biotherapeutics 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.