Correlation Between Seres Therapeutics and Aurinia Pharmaceuticals

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

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

Diversification Opportunities for Seres Therapeutics and Aurinia Pharmaceuticals

0.13

Correlation Coefficient

Seres Therapeutics  Aurinia Pharmaceuticals

Average diversification

The 3 months correlation between Seres and Aurinia is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Aurinia Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurinia Pharmaceuticals 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 Aurinia Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurinia Pharmaceuticals has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Aurinia Pharmaceuticals go up and down completely randomly.

Pair Corralation between Seres Therapeutics and Aurinia Pharmaceuticals

Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.72 times less return on investment than Aurinia Pharmaceuticals. In addition to that, Seres Therapeutics is 1.92 times more volatile than Aurinia Pharmaceuticals. It trades about 0.04 of its total potential returns per unit of risk. Aurinia Pharmaceuticals is currently generating about 0.12 per unit of volatility. If you would invest  728.00  in Aurinia Pharmaceuticals on September 27, 2024 and sell it today you would earn a total of  170.00  from holding Aurinia Pharmaceuticals or generate 23.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Seres Therapeutics  vs.  Aurinia Pharmaceuticals

Seres Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seres Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Seres Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Aurinia Pharmaceuticals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurinia Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Aurinia Pharmaceuticals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seres Therapeutics and Aurinia Pharmaceuticals

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

The idea behind Seres Therapeutics and Aurinia Pharmaceuticals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.