Correlation Between Lineage Cell and Fortress Biotech

Can any of the company-specific risk be diversified away by investing in both Lineage Cell and Fortress Biotech 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 Lineage Cell and Fortress Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lineage Cell Therapeutics and Fortress Biotech Pref, you can compare the effects of market volatilities on Lineage Cell and Fortress Biotech 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 Lineage Cell with a short position of Fortress Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lineage Cell and Fortress Biotech.

Diversification Opportunities for Lineage Cell and Fortress Biotech

-0.59

Correlation Coefficient

Lineage Cell  Fortress Biotech

Excellent diversification

The 3 months correlation between Lineage and Fortress is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lineage Cell Therapeutics and Fortress Biotech Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech Pref and Lineage Cell 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 Lineage Cell Therapeutics are associated (or correlated) with Fortress Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Biotech Pref has no effect on the direction of Lineage Cell i.e., Lineage Cell and Fortress Biotech go up and down completely randomly.

Pair Corralation between Lineage Cell and Fortress Biotech

Given the investment horizon of 90 days Lineage Cell Therapeutics is expected to under-perform the Fortress Biotech. In addition to that, Lineage Cell is 1.65 times more volatile than Fortress Biotech Pref. It trades about -0.12 of its total potential returns per unit of risk. Fortress Biotech Pref is currently generating about 0.09 per unit of volatility. If you would invest  592.00  in Fortress Biotech Pref on September 15, 2024 and sell it today you would earn a total of  106.00  from holding Fortress Biotech Pref or generate 17.91% return on investment over 90 days.

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

Lineage Cell Therapeutics  vs.  Fortress Biotech Pref

Lineage Cell Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lineage Cell 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 fairly 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.

Fortress Biotech Pref

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech Pref are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Fortress Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lineage Cell and Fortress Biotech

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

The idea behind Lineage Cell Therapeutics and Fortress Biotech Pref 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.