Correlation Between Fortress Biotech and Akero Therapeutics

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

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

Diversification Opportunities for Fortress Biotech and Akero Therapeutics

0.37

Correlation Coefficient

Fortress Biotech  Akero Therapeutics

Weak diversification

The 3 months correlation between Fortress and Akero is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech and Akero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akero Therapeutics and Fortress Biotech 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 Fortress Biotech are associated (or correlated) with Akero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akero Therapeutics has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Akero Therapeutics go up and down completely randomly.

Pair Corralation between Fortress Biotech and Akero Therapeutics

Given the investment horizon of 90 days Fortress Biotech is expected to under-perform the Akero Therapeutics. In addition to that, Fortress Biotech is 1.43 times more volatile than Akero Therapeutics. It trades about -0.02 of its total potential returns per unit of risk. Akero Therapeutics is currently generating about 0.01 per unit of volatility. If you would invest  4,949  in Akero Therapeutics on September 23, 2024 and sell it today you would lose (2,015) from holding Akero Therapeutics or give up 40.72% of portfolio value over 90 days.

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

Fortress Biotech  vs.  Akero Therapeutics

Fortress Biotech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Fortress Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Akero Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Akero Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fortress Biotech and Akero Therapeutics

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

The idea behind Fortress Biotech and Akero Therapeutics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.