Correlation Between Kodiak Sciences and Fortress Biotech

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

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

Diversification Opportunities for Kodiak Sciences and Fortress Biotech

-0.38

Correlation Coefficient

Kodiak Sciences  Fortress Biotech

Very good diversification

The 3 months correlation between Kodiak and Fortress is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Sciences 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 Kodiak Sciences 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 Kodiak Sciences 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 Kodiak Sciences i.e., Kodiak Sciences and Fortress Biotech go up and down completely randomly.

Pair Corralation between Kodiak Sciences and Fortress Biotech

Considering the 90-day investment horizon Kodiak Sciences is expected to generate 1.16 times more return on investment than Fortress Biotech. However, Kodiak Sciences is 1.16 times more volatile than Fortress Biotech Pref. It trades about 0.07 of its potential returns per unit of risk. Fortress Biotech Pref is currently generating about -0.02 per unit of risk. If you would invest  300.00  in Kodiak Sciences on August 25, 2024 and sell it today you would earn a total of  319.00  from holding Kodiak Sciences or generate 106.33% return on investment over 90 days.

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

Kodiak Sciences  vs.  Fortress Biotech Pref

Kodiak Sciences

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Kodiak Sciences and Fortress Biotech

The main advantage of trading using opposite Kodiak Sciences and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kodiak Sciences 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 Kodiak Sciences 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.