Correlation Between Trevena and Fortress Biotech

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

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

Diversification Opportunities for Trevena and Fortress Biotech

0.31

Correlation Coefficient

Trevena  Fortress Biotech

Weak diversification

The 3 months correlation between Trevena and Fortress is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Trevena and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech and Trevena 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 Trevena 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 has no effect on the direction of Trevena i.e., Trevena and Fortress Biotech go up and down completely randomly.

Pair Corralation between Trevena and Fortress Biotech

Given the investment horizon of 90 days Trevena is expected to under-perform the Fortress Biotech. In addition to that, Trevena is 3.62 times more volatile than Fortress Biotech. It trades about -0.03 of its total potential returns per unit of risk. Fortress Biotech is currently generating about 0.05 per unit of volatility. If you would invest  197.00  in Fortress Biotech on September 3, 2024 and sell it today you would earn a total of  16.00  from holding Fortress Biotech or generate 8.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	48.44%
Values	Daily Returns

Trevena  vs.  Fortress Biotech

Trevena

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trevena 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fortress Biotech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Fortress Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trevena and Fortress Biotech

The main advantage of trading using opposite Trevena and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trevena 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 Trevena and Fortress Biotech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.