Correlation Between Seres Therapeutics and Leap Therapeutics

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

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

Diversification Opportunities for Seres Therapeutics and Leap Therapeutics

-0.25

Correlation Coefficient

Seres Therapeutics  Leap Therapeutics

Very good diversification

The 3 months correlation between Seres and Leap is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Seres Therapeutics and Leap Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leap Therapeutics 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 Leap Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leap Therapeutics has no effect on the direction of Seres Therapeutics i.e., Seres Therapeutics and Leap Therapeutics go up and down completely randomly.

Pair Corralation between Seres Therapeutics and Leap Therapeutics

Given the investment horizon of 90 days Seres Therapeutics is expected to generate 1.23 times more return on investment than Leap Therapeutics. However, Seres Therapeutics is 1.23 times more volatile than Leap Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Leap Therapeutics is currently generating about 0.03 per unit of risk. If you would invest  78.00  in Seres Therapeutics on August 31, 2024 and sell it today you would earn a total of  14.00  from holding Seres Therapeutics or generate 17.95% return on investment over 90 days.

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

Seres Therapeutics  vs.  Leap Therapeutics

Seres Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seres Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Seres Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Leap Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Leap Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Leap Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Seres Therapeutics and Leap Therapeutics

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

The idea behind Seres Therapeutics and Leap Therapeutics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.