Correlation Between Sellas Life and Sage Therapeutic

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

By analyzing existing cross correlation between Sellas Life Sciences and Sage Therapeutic, you can compare the effects of market volatilities on Sellas Life and Sage Therapeutic 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 Sellas Life with a short position of Sage Therapeutic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sellas Life and Sage Therapeutic.

Diversification Opportunities for Sellas Life and Sage Therapeutic

0.55

Correlation Coefficient

Sellas Life  Sage Therapeutic

Very weak diversification

The 3 months correlation between Sellas and Sage is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sellas Life Sciences and Sage Therapeutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Therapeutic and Sellas Life 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 Sellas Life Sciences are associated (or correlated) with Sage Therapeutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Therapeutic has no effect on the direction of Sellas Life i.e., Sellas Life and Sage Therapeutic go up and down completely randomly.

Pair Corralation between Sellas Life and Sage Therapeutic

Considering the 90-day investment horizon Sellas Life is expected to generate 1.47 times less return on investment than Sage Therapeutic. In addition to that, Sellas Life is 1.51 times more volatile than Sage Therapeutic. It trades about 0.07 of its total potential returns per unit of risk. Sage Therapeutic is currently generating about 0.17 per unit of volatility. If you would invest  554.00  in Sage Therapeutic on December 27, 2024 and sell it today you would earn a total of  306.00  from holding Sage Therapeutic or generate 55.23% return on investment over 90 days.

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

Sellas Life Sciences  vs.  Sage Therapeutic

Sellas Life Sciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sellas Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Sellas Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sage Therapeutic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Therapeutic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Sage Therapeutic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sellas Life and Sage Therapeutic

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

The idea behind Sellas Life Sciences and Sage Therapeutic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..