Correlation Between Hepion Pharmaceuticals and Seres Therapeutics

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

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

Diversification Opportunities for Hepion Pharmaceuticals and Seres Therapeutics

0.18

Correlation Coefficient

Hepion Pharmaceuticals  Seres Therapeutics

Average diversification

The 3 months correlation between Hepion and Seres is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hepion Pharmaceuticals and Seres Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seres Therapeutics and Hepion Pharmaceuticals 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 Hepion Pharmaceuticals 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 Hepion Pharmaceuticals i.e., Hepion Pharmaceuticals and Seres Therapeutics go up and down completely randomly.

Pair Corralation between Hepion Pharmaceuticals and Seres Therapeutics

Given the investment horizon of 90 days Hepion Pharmaceuticals is expected to under-perform the Seres Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Hepion Pharmaceuticals is 1.31 times less risky than Seres Therapeutics. The stock trades about -0.1 of its potential returns per unit of risk. The Seres Therapeutics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Seres Therapeutics on August 31, 2024 and sell it today you would lose (462.00) from holding Seres Therapeutics or give up 82.5% of portfolio value over 90 days.

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

Hepion Pharmaceuticals  vs.  Seres Therapeutics

Hepion Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hepion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hepion Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Seres Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seres Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Seres Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hepion Pharmaceuticals and Seres Therapeutics

The main advantage of trading using opposite Hepion Pharmaceuticals and Seres Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hepion Pharmaceuticals 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 Hepion Pharmaceuticals 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.