Correlation Between Fate Therapeutics and Natera

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

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

Diversification Opportunities for Fate Therapeutics and Natera

-0.61

Correlation Coefficient

Fate Therapeutics  Natera

Excellent diversification

The 3 months correlation between Fate and Natera is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc 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 Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Natera go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Natera

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Natera. In addition to that, Fate Therapeutics is 1.91 times more volatile than Natera Inc. It trades about -0.14 of its total potential returns per unit of risk. Natera Inc is currently generating about 0.14 per unit of volatility. If you would invest  12,308  in Natera Inc on September 24, 2024 and sell it today you would earn a total of  3,880  from holding Natera Inc or generate 31.52% return on investment over 90 days.

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

Fate Therapeutics  vs.  Natera Inc

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.

Natera Inc

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Fate Therapeutics and Natera

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

The idea behind Fate Therapeutics and Natera Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.