Correlation Between NewAmsterdam Pharma and Fate Therapeutics

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

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

Diversification Opportunities for NewAmsterdam Pharma and Fate Therapeutics

-0.84

Correlation Coefficient

NewAmsterdam Pharma  Fate Therapeutics

Pay attention - limited upside

The 3 months correlation between NewAmsterdam and Fate is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding NewAmsterdam Pharma and Fate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fate Therapeutics and NewAmsterdam Pharma 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 NewAmsterdam Pharma are associated (or correlated) with Fate Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fate Therapeutics has no effect on the direction of NewAmsterdam Pharma i.e., NewAmsterdam Pharma and Fate Therapeutics go up and down completely randomly.

Pair Corralation between NewAmsterdam Pharma and Fate Therapeutics

Assuming the 90 days horizon NewAmsterdam Pharma is expected to generate 1.65 times more return on investment than Fate Therapeutics. However, NewAmsterdam Pharma is 1.65 times more volatile than Fate Therapeutics. It trades about 0.1 of its potential returns per unit of risk. Fate Therapeutics is currently generating about -0.02 per unit of risk. If you would invest  90.00  in NewAmsterdam Pharma on October 13, 2024 and sell it today you would earn a total of  1,388  from holding NewAmsterdam Pharma or generate 1542.22% return on investment over 90 days.

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

NewAmsterdam Pharma  vs.  Fate Therapeutics

NewAmsterdam Pharma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, NewAmsterdam Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NewAmsterdam Pharma and Fate Therapeutics

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

The idea behind NewAmsterdam Pharma and Fate Therapeutics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.