Correlation Between Fate Therapeutics and Liquidia Technologies

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

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

Diversification Opportunities for Fate Therapeutics and Liquidia Technologies

-0.4

Correlation Coefficient

Fate Therapeutics  Liquidia Technologies

Very good diversification

The 3 months correlation between Fate and Liquidia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Liquidia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidia Technologies 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 Liquidia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidia Technologies has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Liquidia Technologies go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Liquidia Technologies

Given the investment horizon of 90 days Fate Therapeutics is expected to generate 15.92 times less return on investment than Liquidia Technologies. In addition to that, Fate Therapeutics is 1.92 times more volatile than Liquidia Technologies. It trades about 0.0 of its total potential returns per unit of risk. Liquidia Technologies is currently generating about 0.14 per unit of volatility. If you would invest  910.00  in Liquidia Technologies on September 3, 2024 and sell it today you would earn a total of  245.00  from holding Liquidia Technologies or generate 26.92% return on investment over 90 days.

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

Fate Therapeutics  vs.  Liquidia Technologies

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 rather sound basic indicators, Fate Therapeutics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Liquidia Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidia Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Liquidia Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fate Therapeutics and Liquidia Technologies

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

The idea behind Fate Therapeutics and Liquidia Technologies 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.