Correlation Between Cadiz Depositary and Fortress Biotech

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

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

Diversification Opportunities for Cadiz Depositary and Fortress Biotech

0.49

Correlation Coefficient

Cadiz Depositary  Fortress Biotech

Very weak diversification

The 3 months correlation between Cadiz and Fortress is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Fortress Biotech Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech Pref and Cadiz Depositary 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 Cadiz Depositary Shares 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 Pref has no effect on the direction of Cadiz Depositary i.e., Cadiz Depositary and Fortress Biotech go up and down completely randomly.

Pair Corralation between Cadiz Depositary and Fortress Biotech

Assuming the 90 days horizon Cadiz Depositary is expected to generate 1.47 times less return on investment than Fortress Biotech. But when comparing it to its historical volatility, Cadiz Depositary Shares is 4.09 times less risky than Fortress Biotech. It trades about 0.24 of its potential returns per unit of risk. Fortress Biotech Pref is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  592.00  in Fortress Biotech Pref on September 15, 2024 and sell it today you would earn a total of  106.00  from holding Fortress Biotech Pref or generate 17.91% return on investment over 90 days.

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

Cadiz Depositary Shares  vs.  Fortress Biotech Pref

Cadiz Depositary Shares

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadiz Depositary Shares are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Cadiz Depositary reported solid returns over the last few months and may actually be approaching a breakup point.

Fortress Biotech Pref

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech Pref are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Fortress Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadiz Depositary and Fortress Biotech

The main advantage of trading using opposite Cadiz Depositary and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz Depositary 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 Cadiz Depositary Shares and Fortress Biotech Pref 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.