Correlation Between Fate Therapeutics and Edesa Biotech

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

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

Diversification Opportunities for Fate Therapeutics and Edesa Biotech

0.81

Correlation Coefficient

Fate Therapeutics  Edesa Biotech

Very poor diversification

The 3 months correlation between Fate and Edesa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Edesa Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edesa 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 Edesa Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edesa Biotech has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Edesa Biotech go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Edesa Biotech

Given the investment horizon of 90 days Fate Therapeutics is expected to generate 0.92 times more return on investment than Edesa Biotech. However, Fate Therapeutics is 1.09 times less risky than Edesa Biotech. It trades about -0.02 of its potential returns per unit of risk. Edesa Biotech is currently generating about -0.03 per unit of risk. If you would invest  555.00  in Fate Therapeutics on October 13, 2024 and sell it today you would lose (408.00) from holding Fate Therapeutics or give up 73.51% of portfolio value over 90 days.

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

Fate Therapeutics  vs.  Edesa 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Edesa Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fate Therapeutics and Edesa Biotech

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

The idea behind Fate Therapeutics and Edesa 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.