Correlation Between Seres Therapeutics and Nuvation Bio

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

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

Diversification Opportunities for Seres Therapeutics and Nuvation Bio

0.63

Correlation Coefficient

Seres Therapeutics  Nuvation Bio

Poor diversification

The 3 months correlation between Seres and Nuvation is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio 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 Nuvation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvation Bio has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Nuvation Bio go up and down completely randomly.

Pair Corralation between Seres Therapeutics and Nuvation Bio

Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.18 times more return on investment than Nuvation Bio. However, Seres Therapeutics is 1.18 times more volatile than Nuvation Bio. It trades about -0.05 of its potential returns per unit of risk. Nuvation Bio is currently generating about -0.15 per unit of risk. If you would invest  93.00  in Seres Therapeutics on December 1, 2024 and sell it today you would lose (17.00) from holding Seres Therapeutics or give up 18.28% 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.  Nuvation Bio

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nuvation Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvation Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Seres Therapeutics and Nuvation Bio

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

The idea behind Seres Therapeutics and Nuvation Bio 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.