Correlation Between NextCure and SAB Biotherapeutics

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

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

Diversification Opportunities for NextCure and SAB Biotherapeutics

-0.42

Correlation Coefficient

NextCure  SAB Biotherapeutics

Very good diversification

The 3 months correlation between NextCure and SAB is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and NextCure 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 NextCure 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 NextCure i.e., NextCure and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between NextCure and SAB Biotherapeutics

Given the investment horizon of 90 days NextCure is expected to under-perform the SAB Biotherapeutics. But the stock apears to be less risky and, when comparing its historical volatility, NextCure is 2.66 times less risky than SAB Biotherapeutics. The stock trades about -0.1 of its potential returns per unit of risk. The SAB Biotherapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  230.00  in SAB Biotherapeutics on August 13, 2024 and sell it today you would earn a total of  121.00  from holding SAB Biotherapeutics or generate 52.61% return on investment over 90 days.

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

NextCure  vs.  SAB Biotherapeutics

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure 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 rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SAB Biotherapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 9 (%) 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 NextCure and SAB Biotherapeutics

The main advantage of trading using opposite NextCure and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextCure 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 NextCure 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.