Correlation Between Fortress Biotech and Athira Pharma

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

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

Diversification Opportunities for Fortress Biotech and Athira Pharma

0.3

Correlation Coefficient

Fortress Biotech  Athira Pharma

Weak diversification

The 3 months correlation between Fortress and Athira is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech and Athira Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athira Pharma 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 Athira Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athira Pharma has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Athira Pharma go up and down completely randomly.

Pair Corralation between Fortress Biotech and Athira Pharma

Given the investment horizon of 90 days Fortress Biotech is expected to generate 1.95 times less return on investment than Athira Pharma. But when comparing it to its historical volatility, Fortress Biotech is 1.66 times less risky than Athira Pharma. It trades about 0.08 of its potential returns per unit of risk. Athira Pharma is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Athira Pharma on September 23, 2024 and sell it today you would earn a total of  16.00  from holding Athira Pharma or generate 38.1% return on investment over 90 days.

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

Fortress Biotech  vs.  Athira Pharma

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.

Athira Pharma

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Athira Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Athira Pharma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortress Biotech and Athira Pharma

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

The idea behind Fortress Biotech and Athira Pharma 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.