Correlation Between Opthea and Fate Therapeutics

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

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

Diversification Opportunities for Opthea and Fate Therapeutics

0.61

Correlation Coefficient

Opthea  Fate Therapeutics

Poor diversification

The 3 months correlation between Opthea and Fate is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Fate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fate Therapeutics and Opthea 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 Opthea 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 Opthea i.e., Opthea and Fate Therapeutics go up and down completely randomly.

Pair Corralation between Opthea and Fate Therapeutics

Considering the 90-day investment horizon Opthea is expected to generate 0.47 times more return on investment than Fate Therapeutics. However, Opthea is 2.11 times less risky than Fate Therapeutics. It trades about -0.13 of its potential returns per unit of risk. Fate Therapeutics is currently generating about -0.12 per unit of risk. If you would invest  420.00  in Opthea on September 24, 2024 and sell it today you would lose (86.00) from holding Opthea or give up 20.48% of portfolio value over 90 days.

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

Opthea  vs.  Fate Therapeutics

Opthea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Opthea has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Opthea and Fate Therapeutics

The main advantage of trading using opposite Opthea and Fate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opthea 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 Opthea 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.