Correlation Between Seres Therapeutics and Vir Biotechnology

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

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

Diversification Opportunities for Seres Therapeutics and Vir Biotechnology

-0.18

Correlation Coefficient

Seres Therapeutics  Vir Biotechnology

Good diversification

The 3 months correlation between Seres and Vir is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Vir Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vir Biotechnology 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 Vir Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vir Biotechnology has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Vir Biotechnology go up and down completely randomly.

Pair Corralation between Seres Therapeutics and Vir Biotechnology

Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.37 times more return on investment than Vir Biotechnology. However, Seres Therapeutics is 1.37 times more volatile than Vir Biotechnology. It trades about 0.02 of its potential returns per unit of risk. Vir Biotechnology is currently generating about 0.01 per unit of risk. If you would invest  107.00  in Seres Therapeutics on October 22, 2024 and sell it today you would lose (30.30) from holding Seres Therapeutics or give up 28.32% of portfolio value over 90 days.

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

Seres Therapeutics  vs.  Vir Biotechnology

Seres Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

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

Vir Biotechnology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vir Biotechnology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward indicators, Vir Biotechnology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seres Therapeutics and Vir Biotechnology

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

The idea behind Seres Therapeutics and Vir Biotechnology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.