Correlation Between Fate Therapeutics and Roivant Sciences

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

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

Diversification Opportunities for Fate Therapeutics and Roivant Sciences

-0.03

Correlation Coefficient

Fate Therapeutics  Roivant Sciences

Good diversification

The 3 months correlation between Fate and Roivant is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Roivant Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roivant Sciences 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 Roivant Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roivant Sciences has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Roivant Sciences go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Roivant Sciences

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Roivant Sciences. In addition to that, Fate Therapeutics is 3.84 times more volatile than Roivant Sciences. It trades about -0.15 of its total potential returns per unit of risk. Roivant Sciences is currently generating about -0.02 per unit of volatility. If you would invest  1,190  in Roivant Sciences on September 23, 2024 and sell it today you would lose (33.00) from holding Roivant Sciences or give up 2.77% of portfolio value over 90 days.

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

Fate Therapeutics  vs.  Roivant Sciences

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.

Roivant Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roivant Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Roivant Sciences is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fate Therapeutics and Roivant Sciences

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

The idea behind Fate Therapeutics and Roivant Sciences 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.