Correlation Between ACADIA Pharmaceuticals and Fortress Biotech

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

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

Diversification Opportunities for ACADIA Pharmaceuticals and Fortress Biotech

0.29

Correlation Coefficient

ACADIA Pharmaceuticals  Fortress Biotech

Modest diversification

The 3 months correlation between ACADIA and Fortress is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ACADIA Pharmaceuticals and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech and ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals i.e., ACADIA Pharmaceuticals and Fortress Biotech go up and down completely randomly.

Pair Corralation between ACADIA Pharmaceuticals and Fortress Biotech

Given the investment horizon of 90 days ACADIA Pharmaceuticals is expected to generate 0.51 times more return on investment than Fortress Biotech. However, ACADIA Pharmaceuticals is 1.95 times less risky than Fortress Biotech. It trades about 0.02 of its potential returns per unit of risk. Fortress Biotech is currently generating about -0.02 per unit of risk. If you would invest  1,632  in ACADIA Pharmaceuticals on September 23, 2024 and sell it today you would earn a total of  55.00  from holding ACADIA Pharmaceuticals or generate 3.37% return on investment over 90 days.

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

ACADIA Pharmaceuticals  vs.  Fortress Biotech

ACADIA Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACADIA Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ACADIA Pharmaceuticals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fortress Biotech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Fortress Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACADIA Pharmaceuticals and Fortress Biotech

The main advantage of trading using opposite ACADIA Pharmaceuticals and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals 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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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.