Correlation Between Faraday Future and Ensysce Biosciences

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

By analyzing existing cross correlation between Faraday Future Intelligent and Ensysce Biosciences, you can compare the effects of market volatilities on Faraday Future and Ensysce 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 Faraday Future with a short position of Ensysce Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Future and Ensysce Biosciences.

Diversification Opportunities for Faraday Future and Ensysce Biosciences

0.55

Correlation Coefficient

Faraday Future  Ensysce Biosciences

Very weak diversification

The 3 months correlation between Faraday and Ensysce is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Ensysce Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensysce Biosciences and Faraday Future 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 Faraday Future Intelligent are associated (or correlated) with Ensysce Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensysce Biosciences has no effect on the direction of Faraday Future i.e., Faraday Future and Ensysce Biosciences go up and down completely randomly.

Pair Corralation between Faraday Future and Ensysce Biosciences

Assuming the 90 days horizon Faraday Future is expected to generate 9.85 times less return on investment than Ensysce Biosciences. But when comparing it to its historical volatility, Faraday Future Intelligent is 3.97 times less risky than Ensysce Biosciences. It trades about 0.05 of its potential returns per unit of risk. Ensysce Biosciences is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.70  in Ensysce Biosciences on August 31, 2024 and sell it today you would lose (0.80) from holding Ensysce Biosciences or give up 47.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	17.4%
Values	Daily Returns

Faraday Future Intelligent  vs.  Ensysce Biosciences

Faraday Future Intel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ensysce Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Faraday Future and Ensysce Biosciences

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

The idea behind Faraday Future Intelligent and Ensysce 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.