Correlation Between Cabaletta Bio and Fortress Biotech

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

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

Diversification Opportunities for Cabaletta Bio and Fortress Biotech

-0.15

Correlation Coefficient

Cabaletta Bio  Fortress Biotech

Good diversification

The 3 months correlation between Cabaletta and Fortress is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cabaletta Bio and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech and Cabaletta Bio 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 Cabaletta Bio 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 Cabaletta Bio i.e., Cabaletta Bio and Fortress Biotech go up and down completely randomly.

Pair Corralation between Cabaletta Bio and Fortress Biotech

Given the investment horizon of 90 days Cabaletta Bio is expected to generate 0.95 times more return on investment than Fortress Biotech. However, Cabaletta Bio is 1.05 times less risky than Fortress Biotech. It trades about -0.01 of its potential returns per unit of risk. Fortress Biotech is currently generating about -0.02 per unit of risk. If you would invest  940.00  in Cabaletta Bio on September 23, 2024 and sell it today you would lose (702.00) from holding Cabaletta Bio or give up 74.68% of portfolio value over 90 days.

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

Cabaletta Bio  vs.  Fortress Biotech

Cabaletta Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabaletta Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Cabaletta Bio and Fortress Biotech

The main advantage of trading using opposite Cabaletta Bio and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabaletta Bio 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 Cabaletta Bio 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.