Correlation Between Fortress Biotech and CbdMD

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

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

Diversification Opportunities for Fortress Biotech and CbdMD

0.84

Correlation Coefficient

Fortress Biotech  CbdMD

Very poor diversification

The 3 months correlation between Fortress and CbdMD is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech Pref and cbdMD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cbdMD Inc and Fortress Biotech 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 Fortress Biotech Pref are associated (or correlated) with CbdMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cbdMD Inc has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and CbdMD go up and down completely randomly.

Pair Corralation between Fortress Biotech and CbdMD

Assuming the 90 days horizon Fortress Biotech Pref is expected to generate 0.58 times more return on investment than CbdMD. However, Fortress Biotech Pref is 1.71 times less risky than CbdMD. It trades about -0.15 of its potential returns per unit of risk. cbdMD Inc is currently generating about -0.11 per unit of risk. If you would invest  575.00  in Fortress Biotech Pref on August 25, 2024 and sell it today you would lose (63.00) from holding Fortress Biotech Pref or give up 10.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fortress Biotech Pref  vs.  cbdMD Inc

Fortress Biotech Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortress Biotech Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Preferred Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

cbdMD Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days cbdMD Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fortress Biotech and CbdMD

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

The idea behind Fortress Biotech Pref and cbdMD Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.