Correlation Between Fortress Biotech and Scorpius Holdings

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

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

Diversification Opportunities for Fortress Biotech and Scorpius Holdings

0.79

Correlation Coefficient

Fortress Biotech  Scorpius Holdings

Poor diversification

The 3 months correlation between Fortress and Scorpius is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech and Scorpius Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scorpius Holdings 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 Scorpius Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scorpius Holdings has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Scorpius Holdings go up and down completely randomly.

Pair Corralation between Fortress Biotech and Scorpius Holdings

Given the investment horizon of 90 days Fortress Biotech is expected to generate 0.34 times more return on investment than Scorpius Holdings. However, Fortress Biotech is 2.97 times less risky than Scorpius Holdings. It trades about 0.01 of its potential returns per unit of risk. Scorpius Holdings is currently generating about -0.03 per unit of risk. If you would invest  174.00  in Fortress Biotech on December 22, 2024 and sell it today you would lose (3.00) from holding Fortress Biotech or give up 1.72% of portfolio value over 90 days.

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

Fortress Biotech  vs.  Scorpius Holdings

Fortress Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortress Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Fortress Biotech is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Scorpius Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fortress Biotech and Scorpius Holdings

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

The idea behind Fortress Biotech and Scorpius Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.