Correlation Between Fate Therapeutics and Annexon

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

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

Diversification Opportunities for Fate Therapeutics and Annexon

0.53

Correlation Coefficient

Fate Therapeutics  Annexon

Very weak diversification

The 3 months correlation between Fate and Annexon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Annexon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annexon and Fate 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 Fate Therapeutics are associated (or correlated) with Annexon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annexon has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Annexon go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Annexon

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Annexon. In addition to that, Fate Therapeutics is 1.58 times more volatile than Annexon. It trades about -0.06 of its total potential returns per unit of risk. Annexon is currently generating about 0.04 per unit of volatility. If you would invest  457.00  in Annexon on September 30, 2024 and sell it today you would earn a total of  62.00  from holding Annexon or generate 13.57% return on investment over 90 days.

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

Fate Therapeutics  vs.  Annexon

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fate Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Annexon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Annexon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fate Therapeutics and Annexon

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

The idea behind Fate Therapeutics and Annexon 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.