Correlation Between Ibio and Fortress Biotech

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

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

Diversification Opportunities for Ibio and Fortress Biotech

0.3

Correlation Coefficient

Ibio  Fortress Biotech

Weak diversification

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

Pair Corralation between Ibio and Fortress Biotech

Given the investment horizon of 90 days Ibio Inc is expected to generate 1.85 times more return on investment than Fortress Biotech. However, Ibio is 1.85 times more volatile than Fortress Biotech. It trades about 0.01 of its potential returns per unit of risk. Fortress Biotech is currently generating about -0.03 per unit of risk. If you would invest  1,462  in Ibio Inc on October 7, 2024 and sell it today you would lose (1,217) from holding Ibio Inc or give up 83.24% of portfolio value over 90 days.

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

Ibio Inc  vs.  Fortress Biotech

Ibio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fortress Biotech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Fortress Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ibio and Fortress Biotech

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

The idea behind Ibio Inc and Fortress Biotech 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.