Correlation Between Seres Therapeutics and Lipocine

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

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

Diversification Opportunities for Seres Therapeutics and Lipocine

0.71

Correlation Coefficient

Seres Therapeutics  Lipocine

Poor diversification

The 3 months correlation between Seres and Lipocine is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine 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 Lipocine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipocine has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Lipocine go up and down completely randomly.

Pair Corralation between Seres Therapeutics and Lipocine

Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.23 times more return on investment than Lipocine. However, Seres Therapeutics is 1.23 times more volatile than Lipocine. It trades about 0.0 of its potential returns per unit of risk. Lipocine is currently generating about -0.11 per unit of risk. If you would invest  83.00  in Seres Therapeutics on December 29, 2024 and sell it today you would lose (7.00) from holding Seres Therapeutics or give up 8.43% of portfolio value over 90 days.

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

Seres Therapeutics  vs.  Lipocine

Seres Therapeutics

Risk-Adjusted Performance

Very Weak

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

Lipocine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lipocine 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Seres Therapeutics and Lipocine

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

The idea behind Seres Therapeutics and Lipocine 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.