Correlation Between Fate Therapeutics and Lumos Pharma

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Can any of the company-specific risk be diversified away by investing in both Fate Therapeutics and Lumos Pharma 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 Lumos Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fate Therapeutics and Lumos Pharma, you can compare the effects of market volatilities on Fate Therapeutics and Lumos Pharma 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 Lumos Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fate Therapeutics and Lumos Pharma.

Diversification Opportunities for Fate Therapeutics and Lumos Pharma

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Fate and Lumos is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma 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 Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Lumos Pharma go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Lumos Pharma

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Lumos Pharma. In addition to that, Fate Therapeutics is 13.8 times more volatile than Lumos Pharma. It trades about -0.13 of its total potential returns per unit of risk. Lumos Pharma is currently generating about 0.08 per unit of volatility. If you would invest  431.00  in Lumos Pharma on September 23, 2024 and sell it today you would earn a total of  3.00  from holding Lumos Pharma or generate 0.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy66.67%
ValuesDaily Returns

Fate Therapeutics  vs.  Lumos Pharma

 Performance 
       Timeline  
Fate Therapeutics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Lumos Pharma 

Risk-Adjusted Performance

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Weak
 
Strong
OK
Over the last 90 days Lumos Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady primary indicators, Lumos Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Fate Therapeutics and Lumos Pharma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fate Therapeutics and Lumos Pharma

The main advantage of trading using opposite Fate Therapeutics and Lumos Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fate Therapeutics position performs unexpectedly, Lumos Pharma 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 Lumos Pharma will offset losses from the drop in Lumos Pharma's long position.
The idea behind Fate Therapeutics and Lumos Pharma 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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