Correlation Between SAB Biotherapeutics and Trevena

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

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

Diversification Opportunities for SAB Biotherapeutics and Trevena

-0.47

Correlation Coefficient

SAB Biotherapeutics  Trevena

Very good diversification

The 3 months correlation between SAB and Trevena is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and Trevena in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trevena 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 Trevena. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trevena has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and Trevena go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and Trevena

Assuming the 90 days horizon SAB Biotherapeutics is expected to generate 7.72 times more return on investment than Trevena. However, SAB Biotherapeutics is 7.72 times more volatile than Trevena. It trades about 0.15 of its potential returns per unit of risk. Trevena is currently generating about -0.03 per unit of risk. If you would invest  2.60  in SAB Biotherapeutics on September 1, 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 Against
Strength	Very Weak
Accuracy	58.49%
Values	Daily Returns

SAB Biotherapeutics  vs.  Trevena

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 uncertain basic indicators, SAB Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Trevena

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trevena has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with SAB Biotherapeutics and Trevena

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

The idea behind SAB Biotherapeutics and Trevena 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.