Correlation Between Precision BioSciences and SAB Biotherapeutics

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

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

Diversification Opportunities for Precision BioSciences and SAB Biotherapeutics

-0.64

Correlation Coefficient

Precision BioSciences  SAB Biotherapeutics

Excellent diversification

The 3 months correlation between Precision and SAB is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Precision BioSciences and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Precision BioSciences 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 Precision BioSciences 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 Precision BioSciences i.e., Precision BioSciences and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Precision BioSciences and SAB Biotherapeutics

Given the investment horizon of 90 days Precision BioSciences is expected to under-perform the SAB Biotherapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Precision BioSciences is 5.41 times less risky than SAB Biotherapeutics. The stock trades about -0.12 of its potential returns per unit of risk. The SAB Biotherapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3.90  in SAB Biotherapeutics on August 16, 2024 and sell it today you would earn a total of  1.11  from holding SAB Biotherapeutics or generate 28.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.36%
Values	Daily Returns

Precision BioSciences  vs.  SAB Biotherapeutics

Precision BioSciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precision BioSciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Precision BioSciences is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

SAB Biotherapeutics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 15 (%) 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.

Pair Trading with Precision BioSciences and SAB Biotherapeutics

The main advantage of trading using opposite Precision BioSciences and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision BioSciences 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 Precision BioSciences 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.