Correlation Between Seres Therapeutics and Equillium

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

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

Diversification Opportunities for Seres Therapeutics and Equillium

-0.25

Correlation Coefficient

Seres Therapeutics  Equillium

Very good diversification

The 3 months correlation between Seres and Equillium is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and Seres Therapeutics 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 Seres Therapeutics are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Equillium go up and down completely randomly.

Pair Corralation between Seres Therapeutics and Equillium

Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.51 times more return on investment than Equillium. However, Seres Therapeutics is 1.51 times more volatile than Equillium. It trades about 0.08 of its potential returns per unit of risk. Equillium is currently generating about -0.19 per unit of risk. If you would invest  77.00  in Seres Therapeutics on January 29, 2024 and sell it today you would earn a total of  6.00  from holding Seres Therapeutics or generate 7.79% return on investment over 90 days.

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

Seres Therapeutics  vs.  Equillium

Seres Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seres Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Equillium

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seres Therapeutics and Equillium

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

The idea behind Seres Therapeutics and Equillium 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.