Correlation Between Precision BioSciences and Fortress Biotech

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

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

Diversification Opportunities for Precision BioSciences and Fortress Biotech

-0.54

Correlation Coefficient

Precision BioSciences  Fortress Biotech

Excellent diversification

The 3 months correlation between Precision and Fortress is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Precision BioSciences and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech and Precision BioSciences 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 Precision BioSciences 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 Precision BioSciences i.e., Precision BioSciences and Fortress Biotech go up and down completely randomly.

Pair Corralation between Precision BioSciences and Fortress Biotech

Given the investment horizon of 90 days Precision BioSciences is expected to under-perform the Fortress Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Precision BioSciences is 1.36 times less risky than Fortress Biotech. The stock trades about -0.05 of its potential returns per unit of risk. The Fortress Biotech is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  960.00  in Fortress Biotech on October 12, 2024 and sell it today you would lose (752.00) from holding Fortress Biotech or give up 78.33% of portfolio value over 90 days.

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

Precision BioSciences  vs.  Fortress Biotech

Precision BioSciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precision BioSciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Fortress Biotech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Fortress Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision BioSciences and Fortress Biotech

The main advantage of trading using opposite Precision BioSciences and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision BioSciences 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 Precision BioSciences 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.