Correlation Between Fate Therapeutics and Sera Prognostics

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

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

Diversification Opportunities for Fate Therapeutics and Sera Prognostics

-0.44

Correlation Coefficient

Fate Therapeutics  Sera Prognostics

Very good diversification

The 3 months correlation between Fate and Sera is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Sera Prognostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sera Prognostics and Fate 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 Fate Therapeutics are associated (or correlated) with Sera Prognostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sera Prognostics has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Sera Prognostics go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Sera Prognostics

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Sera Prognostics. In addition to that, Fate Therapeutics is 1.02 times more volatile than Sera Prognostics. It trades about -0.24 of its total potential returns per unit of risk. Sera Prognostics is currently generating about -0.18 per unit of volatility. If you would invest  854.00  in Sera Prognostics on October 13, 2024 and sell it today you would lose (161.00) from holding Sera Prognostics or give up 18.85% of portfolio value over 90 days.

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

Fate Therapeutics  vs.  Sera Prognostics

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fate Therapeutics 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sera Prognostics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sera Prognostics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sera Prognostics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fate Therapeutics and Sera Prognostics

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

The idea behind Fate Therapeutics and Sera Prognostics 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.