Correlation Between Fortress Biotech and Franchise

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

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

Diversification Opportunities for Fortress Biotech and Franchise

0.5

Correlation Coefficient

Fortress Biotech  Franchise

Very weak diversification

The 3 months correlation between Fortress and Franchise is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech Pref and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group 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 Pref are associated (or correlated) with Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Franchise go up and down completely randomly.

Pair Corralation between Fortress Biotech and Franchise

Assuming the 90 days horizon Fortress Biotech Pref is expected to under-perform the Franchise. In addition to that, Fortress Biotech is 2.17 times more volatile than Franchise Group. It trades about 0.0 of its total potential returns per unit of risk. Franchise Group is currently generating about 0.08 per unit of volatility. If you would invest  2,045  in Franchise Group on September 24, 2024 and sell it today you would earn a total of  448.00  from holding Franchise Group or generate 21.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.17%
Values	Daily Returns

Fortress Biotech Pref  vs.  Franchise Group

Fortress Biotech Pref

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech Pref are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Fortress Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fortress Biotech and Franchise

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

The idea behind Fortress Biotech Pref and Franchise Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.