Correlation Between Ocular Therapeutix and Seres Therapeutics

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

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

Diversification Opportunities for Ocular Therapeutix and Seres Therapeutics

-0.46

Correlation Coefficient

Ocular Therapeutix  Seres Therapeutics

Very good diversification

The 3 months correlation between Ocular and Seres is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ocular Therapeutix and Seres Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seres Therapeutics and Ocular Therapeutix 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 Ocular Therapeutix are associated (or correlated) with Seres Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seres Therapeutics has no effect on the direction of Ocular Therapeutix i.e., Ocular Therapeutix and Seres Therapeutics go up and down completely randomly.

Pair Corralation between Ocular Therapeutix and Seres Therapeutics

Given the investment horizon of 90 days Ocular Therapeutix is expected to generate 1.46 times less return on investment than Seres Therapeutics. But when comparing it to its historical volatility, Ocular Therapeutix is 1.95 times less risky than Seres Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Seres Therapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Seres Therapeutics on September 4, 2024 and sell it today you would earn a total of  11.00  from holding Seres Therapeutics or generate 13.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ocular Therapeutix  vs.  Seres Therapeutics

Ocular Therapeutix

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Ocular Therapeutix disclosed solid returns over the last few months and may actually be approaching a breakup point.

Seres Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seres Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Seres Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ocular Therapeutix and Seres Therapeutics

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

The idea behind Ocular Therapeutix and Seres 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.