Correlation Between SAB Biotherapeutics and AbbVie

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

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

Diversification Opportunities for SAB Biotherapeutics and AbbVie

-0.39

Correlation Coefficient

SAB Biotherapeutics  AbbVie

Very good diversification

The 3 months correlation between SAB and AbbVie is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SAB Biotherapeutics and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of SAB Biotherapeutics i.e., SAB Biotherapeutics and AbbVie go up and down completely randomly.

Pair Corralation between SAB Biotherapeutics and AbbVie

Assuming the 90 days horizon SAB Biotherapeutics is expected to generate 8.3 times more return on investment than AbbVie. However, SAB Biotherapeutics is 8.3 times more volatile than AbbVie Inc. It trades about 0.4 of its potential returns per unit of risk. AbbVie Inc is currently generating about -0.1 per unit of risk. If you would invest  3.00  in SAB Biotherapeutics on February 7, 2024 and sell it today you would earn a total of  0.80  from holding SAB Biotherapeutics or generate 26.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.57%
Values	Daily Returns

SAB Biotherapeutics  vs.  AbbVie Inc

SAB Biotherapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SAB Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

AbbVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, AbbVie is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SAB Biotherapeutics and AbbVie

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

The idea behind SAB Biotherapeutics and AbbVie Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.