Correlation Between Seres Therapeutics and Prothena Plc
Can any of the company-specific risk be diversified away by investing in both Seres Therapeutics and Prothena Plc 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 Prothena Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seres Therapeutics and Prothena plc, you can compare the effects of market volatilities on Seres Therapeutics and Prothena Plc 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 Prothena Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seres Therapeutics and Prothena Plc.
Diversification Opportunities for Seres Therapeutics and Prothena Plc
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seres and Prothena is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Prothena plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prothena plc 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 Prothena Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prothena plc has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Prothena Plc go up and down completely randomly.
Pair Corralation between Seres Therapeutics and Prothena Plc
Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.71 times more return on investment than Prothena Plc. However, Seres Therapeutics is 1.71 times more volatile than Prothena plc. It trades about 0.26 of its potential returns per unit of risk. Prothena plc is currently generating about -0.2 per unit of risk. If you would invest 59.00 in Seres Therapeutics on September 14, 2024 and sell it today you would earn a total of 27.00 from holding Seres Therapeutics or generate 45.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seres Therapeutics vs. Prothena plc
Performance |
| Timeline |
| Seres Therapeutics |
| Prothena plc |
Seres Therapeutics and Prothena Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seres Therapeutics and Prothena Plc
The main advantage of trading using opposite Seres Therapeutics and Prothena Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seres Therapeutics position performs unexpectedly, Prothena Plc 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 Prothena Plc will offset losses from the drop in Prothena Plc's long position.| Seres Therapeutics vs. Syros Pharmaceuticals | Seres Therapeutics vs. Iovance Biotherapeutics | Seres Therapeutics vs. Veracyte | Seres Therapeutics vs. Fate Therapeutics |
| Prothena Plc vs. Scpharmaceuticals | Prothena Plc vs. Milestone Pharmaceuticals | Prothena Plc vs. Oncolytics Biotech | Prothena Plc vs. Seres Therapeutics |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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