Correlation Between Fortress Biotech and Star Equity

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

Diversification Opportunities for Fortress Biotech and Star Equity

0.3

Correlation Coefficient

Fortress Biotech  Star Equity

Weak diversification

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

Pair Corralation between Fortress Biotech and Star Equity

Assuming the 90 days horizon Fortress Biotech Pref is expected to under-perform the Star Equity. In addition to that, Fortress Biotech is 1.85 times more volatile than Star Equity Holdings. It trades about -0.03 of its total potential returns per unit of risk. Star Equity Holdings is currently generating about -0.01 per unit of volatility. If you would invest  965.00  in Star Equity Holdings on September 2, 2024 and sell it today you would lose (23.00) from holding Star Equity Holdings or give up 2.38% 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 Pref  vs.  Star Equity Holdings

Fortress Biotech Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortress Biotech Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Preferred Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Star Equity Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Equity Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Star Equity 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 Star Equity

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

The idea behind Fortress Biotech Pref and Star Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.