Correlation Between Fate Therapeutics and Elevation Oncology

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

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

Diversification Opportunities for Fate Therapeutics and Elevation Oncology

-0.34

Correlation Coefficient

Fate Therapeutics  Elevation Oncology

Very good diversification

The 3 months correlation between Fate and Elevation is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Elevation Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elevation Oncology 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 Elevation Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elevation Oncology has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Elevation Oncology go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Elevation Oncology

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Elevation Oncology. But the stock apears to be less risky and, when comparing its historical volatility, Fate Therapeutics is 1.93 times less risky than Elevation Oncology. The stock trades about -0.03 of its potential returns per unit of risk. The Elevation Oncology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Elevation Oncology on September 27, 2024 and sell it today you would lose (49.60) from holding Elevation Oncology or give up 46.79% of portfolio value over 90 days.

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

Fate Therapeutics  vs.  Elevation Oncology

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.

Elevation Oncology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elevation Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Elevation Oncology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fate Therapeutics and Elevation Oncology

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

The idea behind Fate Therapeutics and Elevation Oncology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.