Correlation Between Sera Prognostics and HCW Biologics

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

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

Diversification Opportunities for Sera Prognostics and HCW Biologics

-0.19

Correlation Coefficient

Sera Prognostics  HCW Biologics

Good diversification

The 3 months correlation between Sera and HCW is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sera Prognostics and HCW Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCW Biologics and Sera Prognostics 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 Sera Prognostics are associated (or correlated) with HCW Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCW Biologics has no effect on the direction of Sera Prognostics i.e., Sera Prognostics and HCW Biologics go up and down completely randomly.

Pair Corralation between Sera Prognostics and HCW Biologics

Given the investment horizon of 90 days Sera Prognostics is expected to generate 6.14 times less return on investment than HCW Biologics. But when comparing it to its historical volatility, Sera Prognostics is 3.04 times less risky than HCW Biologics. It trades about 0.1 of its potential returns per unit of risk. HCW Biologics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  42.00  in HCW Biologics on June 26, 2024 and sell it today you would earn a total of  17.00  from holding HCW Biologics or generate 40.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sera Prognostics  vs.  HCW Biologics

Sera Prognostics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sera Prognostics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sera Prognostics sustained solid returns over the last few months and may actually be approaching a breakup point.

HCW Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCW Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sera Prognostics and HCW Biologics

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

The idea behind Sera Prognostics and HCW Biologics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.