Correlation Between Centessa Pharmaceuticals and Fortescue

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

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

Diversification Opportunities for Centessa Pharmaceuticals and Fortescue

0.52

Correlation Coefficient

Centessa Pharmaceuticals  Fortescue

Very weak diversification

The 3 months correlation between Centessa and Fortescue is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Centessa 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 Centessa Pharmaceuticals PLC are associated (or correlated) with Fortescue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Fortescue go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and Fortescue

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to under-perform the Fortescue. In addition to that, Centessa Pharmaceuticals is 14.02 times more volatile than Fortescue Metals Group. It trades about -0.06 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.02 per unit of volatility. If you would invest  9,799  in Fortescue Metals Group on November 29, 2024 and sell it today you would lose (32.00) from holding Fortescue Metals Group or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.67%
Values	Daily Returns

Centessa Pharmaceuticals PLC  vs.  Fortescue Metals Group

Centessa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

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

Fortescue Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortescue is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Centessa Pharmaceuticals and Fortescue

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

The idea behind Centessa Pharmaceuticals PLC and Fortescue Metals Group 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.