Correlation Between Fate Therapeutics and Celldex Therapeutics

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

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

Diversification Opportunities for Fate Therapeutics and Celldex Therapeutics

0.77

Correlation Coefficient

Fate Therapeutics  Celldex Therapeutics

Poor diversification

The 3 months correlation between Fate and Celldex is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Celldex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celldex Therapeutics and Fate Therapeutics 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 Fate Therapeutics are associated (or correlated) with Celldex Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celldex Therapeutics has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Celldex Therapeutics go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Celldex Therapeutics

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Celldex Therapeutics. In addition to that, Fate Therapeutics is 2.06 times more volatile than Celldex Therapeutics. It trades about -0.15 of its total potential returns per unit of risk. Celldex Therapeutics is currently generating about -0.13 per unit of volatility. If you would invest  3,399  in Celldex Therapeutics on September 28, 2024 and sell it today you would lose (890.00) from holding Celldex Therapeutics or give up 26.18% of portfolio value over 90 days.

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

Fate Therapeutics  vs.  Celldex Therapeutics

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.

Celldex Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celldex Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fate Therapeutics and Celldex Therapeutics

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

The idea behind Fate Therapeutics and Celldex 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.