Correlation Between Spero Therapeutics and Ocular Therapeutix

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

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

Diversification Opportunities for Spero Therapeutics and Ocular Therapeutix

-0.12

Correlation Coefficient

Spero Therapeutics  Ocular Therapeutix

Good diversification

The 3 months correlation between Spero and Ocular is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Spero Therapeutics and Ocular Therapeutix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocular Therapeutix and Spero 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 Spero Therapeutics are associated (or correlated) with Ocular Therapeutix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocular Therapeutix has no effect on the direction of Spero Therapeutics i.e., Spero Therapeutics and Ocular Therapeutix go up and down completely randomly.

Pair Corralation between Spero Therapeutics and Ocular Therapeutix

Given the investment horizon of 90 days Spero Therapeutics is expected to under-perform the Ocular Therapeutix. But the stock apears to be less risky and, when comparing its historical volatility, Spero Therapeutics is 1.37 times less risky than Ocular Therapeutix. The stock trades about -0.09 of its potential returns per unit of risk. The Ocular Therapeutix is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  835.00  in Ocular Therapeutix on September 3, 2024 and sell it today you would earn a total of  154.00  from holding Ocular Therapeutix or generate 18.44% return on investment over 90 days.

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

Spero Therapeutics  vs.  Ocular Therapeutix

Spero Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spero Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ocular Therapeutix

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Ocular Therapeutix disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spero Therapeutics and Ocular Therapeutix

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

The idea behind Spero Therapeutics and Ocular Therapeutix 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.