Correlation Between Fate Therapeutics and Vertex Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Fate Therapeutics and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fate Therapeutics and Vertex Pharmaceuticals, you can compare the effects of market volatilities on Fate Therapeutics and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fate Therapeutics and Vertex Pharmaceuticals.
Diversification Opportunities for Fate Therapeutics and Vertex Pharmaceuticals
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fate and Vertex is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Vertex Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Vertex Pharmaceuticals go up and down completely randomly.
Pair Corralation between Fate Therapeutics and Vertex Pharmaceuticals
Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Vertex Pharmaceuticals. In addition to that, Fate Therapeutics is 2.9 times more volatile than Vertex Pharmaceuticals. It trades about -0.17 of its total potential returns per unit of risk. Vertex Pharmaceuticals is currently generating about -0.19 per unit of volatility. If you would invest 46,171 in Vertex Pharmaceuticals on September 25, 2024 and sell it today you would lose (5,353) from holding Vertex Pharmaceuticals or give up 11.59% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Fate Therapeutics vs. Vertex Pharmaceuticals
Performance |
Timeline |
Fate Therapeutics |
Vertex Pharmaceuticals |
Fate Therapeutics and Vertex Pharmaceuticals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fate Therapeutics and Vertex Pharmaceuticals
The main advantage of trading using opposite Fate Therapeutics and Vertex Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fate Therapeutics position performs unexpectedly, Vertex Pharmaceuticals 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 Vertex Pharmaceuticals will offset losses from the drop in Vertex Pharmaceuticals' long position.Fate Therapeutics vs. Atara Biotherapeutics | Fate Therapeutics vs. Sana Biotechnology | Fate Therapeutics vs. Caribou Biosciences | Fate Therapeutics vs. Arcus Biosciences |
Vertex Pharmaceuticals vs. Fate Therapeutics | Vertex Pharmaceuticals vs. Caribou Biosciences | Vertex Pharmaceuticals vs. Karyopharm Therapeutics | Vertex Pharmaceuticals vs. X4 Pharmaceuticals |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |