Correlation Between Fortress Biotech and Kodiak Sciences

Can any of the company-specific risk be diversified away by investing in both Fortress Biotech and Kodiak Sciences 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 Kodiak Sciences 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 Kodiak Sciences, you can compare the effects of market volatilities on Fortress Biotech and Kodiak Sciences 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 Kodiak Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortress Biotech and Kodiak Sciences.

Diversification Opportunities for Fortress Biotech and Kodiak Sciences

0.55

Correlation Coefficient

Fortress Biotech  Kodiak Sciences

Very weak diversification

The 3 months correlation between Fortress and Kodiak is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech Pref and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences 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 Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Kodiak Sciences go up and down completely randomly.

Pair Corralation between Fortress Biotech and Kodiak Sciences

Assuming the 90 days horizon Fortress Biotech Pref is expected to generate 0.49 times more return on investment than Kodiak Sciences. However, Fortress Biotech Pref is 2.05 times less risky than Kodiak Sciences. It trades about 0.03 of its potential returns per unit of risk. Kodiak Sciences is currently generating about -0.07 per unit of risk. If you would invest  591.00  in Fortress Biotech Pref on November 28, 2024 and sell it today you would earn a total of  14.00  from holding Fortress Biotech Pref or generate 2.37% return on investment over 90 days.

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

Fortress Biotech Pref  vs.  Kodiak Sciences

Fortress Biotech Pref

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech Pref are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fortress Biotech may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Kodiak Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kodiak Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fortress Biotech and Kodiak Sciences

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

The idea behind Fortress Biotech Pref and Kodiak Sciences 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.