Correlation Between Adaptimmune Therapeutics and Fortress Biotech
Can any of the company-specific risk be diversified away by investing in both Adaptimmune Therapeutics and Fortress Biotech 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 Adaptimmune Therapeutics and Fortress Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaptimmune Therapeutics Plc and Fortress Biotech, you can compare the effects of market volatilities on Adaptimmune Therapeutics and Fortress Biotech 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 Adaptimmune Therapeutics with a short position of Fortress Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaptimmune Therapeutics and Fortress Biotech.
Diversification Opportunities for Adaptimmune Therapeutics and Fortress Biotech
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adaptimmune and Fortress is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Adaptimmune Therapeutics Plc and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech and Adaptimmune 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 Adaptimmune Therapeutics Plc are associated (or correlated) with Fortress Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Biotech has no effect on the direction of Adaptimmune Therapeutics i.e., Adaptimmune Therapeutics and Fortress Biotech go up and down completely randomly.
Pair Corralation between Adaptimmune Therapeutics and Fortress Biotech
Given the investment horizon of 90 days Adaptimmune Therapeutics Plc is expected to generate 1.53 times more return on investment than Fortress Biotech. However, Adaptimmune Therapeutics is 1.53 times more volatile than Fortress Biotech. It trades about 0.06 of its potential returns per unit of risk. Fortress Biotech is currently generating about -0.08 per unit of risk. If you would invest 70.00 in Adaptimmune Therapeutics Plc on August 30, 2024 and sell it today you would earn a total of 3.00 from holding Adaptimmune Therapeutics Plc or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adaptimmune Therapeutics Plc vs. Fortress Biotech
Performance |
| Timeline |
| Adaptimmune Therapeutics |
| Fortress Biotech |
Adaptimmune Therapeutics and Fortress Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaptimmune Therapeutics and Fortress Biotech
The main advantage of trading using opposite Adaptimmune Therapeutics and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaptimmune Therapeutics position performs unexpectedly, Fortress Biotech 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 Fortress Biotech will offset losses from the drop in Fortress Biotech's long position.The idea behind Adaptimmune Therapeutics Plc and Fortress Biotech 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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Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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