Correlation Between SAB Biotherapeutics and GRI Bio

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

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

Diversification Opportunities for SAB Biotherapeutics and GRI Bio

0.61

Correlation Coefficient

SAB Biotherapeutics  GRI Bio

Poor diversification

The 3 months correlation between SAB and GRI is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and GRI Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRI Bio 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 GRI Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRI Bio has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and GRI Bio go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and GRI Bio

Assuming the 90 days horizon SAB Biotherapeutics is expected to generate 7.25 times more return on investment than GRI Bio. However, SAB Biotherapeutics is 7.25 times more volatile than GRI Bio. It trades about 0.15 of its potential returns per unit of risk. GRI Bio is currently generating about 0.09 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	Significant
Accuracy	84.38%
Values	Daily Returns

SAB Biotherapeutics  vs.  GRI Bio

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.

GRI Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GRI Bio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, GRI Bio demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAB Biotherapeutics and GRI Bio

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

The idea behind SAB Biotherapeutics and GRI Bio 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.