Correlation Between Fate Therapeutics and Arcus Biosciences

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

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

Diversification Opportunities for Fate Therapeutics and Arcus Biosciences

0.35

Correlation Coefficient

Fate Therapeutics  Arcus Biosciences

Weak diversification

The 3 months correlation between Fate and Arcus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Arcus Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcus Biosciences 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 Arcus Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcus Biosciences has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Arcus Biosciences go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Arcus Biosciences

Given the investment horizon of 90 days Fate Therapeutics is expected to generate 1.88 times more return on investment than Arcus Biosciences. However, Fate Therapeutics is 1.88 times more volatile than Arcus Biosciences. It trades about 0.13 of its potential returns per unit of risk. Arcus Biosciences is currently generating about 0.01 per unit of risk. If you would invest  276.00  in Fate Therapeutics on September 3, 2024 and sell it today you would earn a total of  41.00  from holding Fate Therapeutics or generate 14.86% return on investment over 90 days.

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

Fate Therapeutics  vs.  Arcus Biosciences

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.

Arcus Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcus Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Arcus Biosciences is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fate Therapeutics and Arcus Biosciences

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

The idea behind Fate Therapeutics and Arcus Biosciences 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.