Correlation Between Fate Therapeutics and Burning Rock

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

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

Diversification Opportunities for Fate Therapeutics and Burning Rock

-0.6

Correlation Coefficient

Fate Therapeutics  Burning Rock

Excellent diversification

The 3 months correlation between Fate and Burning is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Burning Rock Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burning Rock Biotech 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 Burning Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burning Rock Biotech has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Burning Rock go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Burning Rock

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Burning Rock. But the stock apears to be less risky and, when comparing its historical volatility, Fate Therapeutics is 1.1 times less risky than Burning Rock. The stock trades about -0.14 of its potential returns per unit of risk. The Burning Rock Biotech is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  339.00  in Burning Rock Biotech on September 26, 2024 and sell it today you would earn a total of  311.00  from holding Burning Rock Biotech or generate 91.74% return on investment over 90 days.

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

Fate Therapeutics  vs.  Burning Rock Biotech

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.

Burning Rock Biotech

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fate Therapeutics and Burning Rock

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

The idea behind Fate Therapeutics and Burning Rock 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.