Correlation Between Fate Therapeutics and Zura Bio

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

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

Diversification Opportunities for Fate Therapeutics and Zura Bio

0.63

Correlation Coefficient

Fate Therapeutics  Zura Bio

Poor diversification

The 3 months correlation between Fate and Zura is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Zura Bio Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zura Bio Limited 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 Zura Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zura Bio Limited has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Zura Bio go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Zura Bio

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Zura Bio. But the stock apears to be less risky and, when comparing its historical volatility, Fate Therapeutics is 2.63 times less risky than Zura Bio. The stock trades about -0.03 of its potential returns per unit of risk. The Zura Bio Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  816.00  in Zura Bio Limited on September 26, 2024 and sell it today you would lose (584.00) from holding Zura Bio Limited or give up 71.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.92%
Values	Daily Returns

Fate Therapeutics  vs.  Zura Bio Limited

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.

Zura Bio Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zura Bio Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fate Therapeutics and Zura Bio

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

The idea behind Fate Therapeutics and Zura Bio Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.