Correlation Between Sarepta Therapeutics and Sera Prognostics

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

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

Diversification Opportunities for Sarepta Therapeutics and Sera Prognostics

0.45

Correlation Coefficient

Sarepta Therapeutics  Sera Prognostics

Very weak diversification

The 3 months correlation between Sarepta and Sera is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sarepta Therapeutics and Sera Prognostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sera Prognostics and Sarepta 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 Sarepta Therapeutics are associated (or correlated) with Sera Prognostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sera Prognostics has no effect on the direction of Sarepta Therapeutics i.e., Sarepta Therapeutics and Sera Prognostics go up and down completely randomly.

Pair Corralation between Sarepta Therapeutics and Sera Prognostics

Given the investment horizon of 90 days Sarepta Therapeutics is expected to generate 11.51 times less return on investment than Sera Prognostics. But when comparing it to its historical volatility, Sarepta Therapeutics is 2.05 times less risky than Sera Prognostics. It trades about 0.01 of its potential returns per unit of risk. Sera Prognostics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  772.00  in Sera Prognostics on September 14, 2024 and sell it today you would earn a total of  85.00  from holding Sera Prognostics or generate 11.01% return on investment over 90 days.

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

Sarepta Therapeutics  vs.  Sera Prognostics

Sarepta Therapeutics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sarepta Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarepta Therapeutics is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sera Prognostics

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sarepta Therapeutics and Sera Prognostics

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

The idea behind Sarepta Therapeutics and Sera Prognostics 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.