Correlation Between Novavax and Seres Therapeutics
Can any of the company-specific risk be diversified away by investing in both Novavax and Seres Therapeutics 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 Novavax and Seres Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novavax and Seres Therapeutics, you can compare the effects of market volatilities on Novavax and Seres Therapeutics 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 Novavax with a short position of Seres Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novavax and Seres Therapeutics.
Diversification Opportunities for Novavax and Seres Therapeutics
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novavax and Seres is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Novavax and Seres Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seres Therapeutics and Novavax 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 Novavax are associated (or correlated) with Seres Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seres Therapeutics has no effect on the direction of Novavax i.e., Novavax and Seres Therapeutics go up and down completely randomly.
Pair Corralation between Novavax and Seres Therapeutics
Given the investment horizon of 90 days Novavax is expected to under-perform the Seres Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Novavax is 1.84 times less risky than Seres Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The Seres Therapeutics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 70.00 in Seres Therapeutics on August 27, 2024 and sell it today you would earn a total of 19.00 from holding Seres Therapeutics or generate 27.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novavax vs. Seres Therapeutics
Performance |
| Timeline |
| Novavax |
| Seres Therapeutics |
Novavax and Seres Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novavax and Seres Therapeutics
The main advantage of trading using opposite Novavax and Seres Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novavax position performs unexpectedly, Seres Therapeutics 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 Seres Therapeutics will offset losses from the drop in Seres Therapeutics' long position.The idea behind Novavax and Seres Therapeutics 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.| Seres Therapeutics vs. Syros Pharmaceuticals | Seres Therapeutics vs. Iovance Biotherapeutics | Seres Therapeutics vs. Veracyte | Seres Therapeutics vs. Fate 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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