Correlation Between Fortress Biotech and Ocuphire Pharma

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

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

Diversification Opportunities for Fortress Biotech and Ocuphire Pharma

0.49

Correlation Coefficient

Fortress Biotech  Ocuphire Pharma

Very weak diversification

The 3 months correlation between Fortress and Ocuphire is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech and Ocuphire Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocuphire Pharma 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 are associated (or correlated) with Ocuphire Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocuphire Pharma has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and Ocuphire Pharma go up and down completely randomly.

Pair Corralation between Fortress Biotech and Ocuphire Pharma

Given the investment horizon of 90 days Fortress Biotech is expected to under-perform the Ocuphire Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Fortress Biotech is 2.26 times less risky than Ocuphire Pharma. The stock trades about -0.01 of its potential returns per unit of risk. The Ocuphire Pharma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  174.00  in Ocuphire Pharma on February 16, 2024 and sell it today you would lose (1.00) from holding Ocuphire Pharma or give up 0.57% of portfolio value over 90 days.

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

Fortress Biotech  vs.  Ocuphire Pharma

Fortress Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortress Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Fortress Biotech is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ocuphire Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fortress Biotech and Ocuphire Pharma

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

The idea behind Fortress Biotech and Ocuphire Pharma 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.