Correlation Between Fortress Biotech and Instil Bio

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

Diversification Opportunities for Fortress Biotech and Instil Bio

0.32

Correlation Coefficient

Fortress Biotech  Instil Bio

Weak diversification

The 3 months correlation between Fortress and Instil is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech Pref and Instil Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Instil Bio 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 Instil Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Instil Bio has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Instil Bio go up and down completely randomly.

Pair Corralation between Fortress Biotech and Instil Bio

Assuming the 90 days horizon Fortress Biotech Pref is expected to under-perform the Instil Bio. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fortress Biotech Pref is 2.67 times less risky than Instil Bio. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Instil Bio is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,899  in Instil Bio on December 28, 2024 and sell it today you would lose (44.00) from holding Instil Bio or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Fortress Biotech Pref  vs.  Instil Bio

Fortress Biotech Pref

Risk-Adjusted Performance

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 relatively invariable basic indicators, Fortress Biotech is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Instil Bio

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Instil Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Instil Bio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortress Biotech and Instil Bio

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

The idea behind Fortress Biotech Pref and Instil Bio 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.