Correlation Between Forte Biosciences and Adverum Biotechnologies

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

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

Diversification Opportunities for Forte Biosciences and Adverum Biotechnologies

0.29

Correlation Coefficient

Forte Biosciences  Adverum Biotechnologies

Modest diversification

The 3 months correlation between Forte and Adverum is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Forte Biosciences and Adverum Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adverum Biotechnologies and Forte Biosciences 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 Forte Biosciences are associated (or correlated) with Adverum Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adverum Biotechnologies has no effect on the direction of Forte Biosciences i.e., Forte Biosciences and Adverum Biotechnologies go up and down completely randomly.

Pair Corralation between Forte Biosciences and Adverum Biotechnologies

Given the investment horizon of 90 days Forte Biosciences is expected to generate 1.15 times more return on investment than Adverum Biotechnologies. However, Forte Biosciences is 1.15 times more volatile than Adverum Biotechnologies. It trades about -0.06 of its potential returns per unit of risk. Adverum Biotechnologies is currently generating about -0.4 per unit of risk. If you would invest  71.00  in Forte Biosciences on March 5, 2024 and sell it today you would lose (12.00) from holding Forte Biosciences or give up 16.9% of portfolio value over 90 days.

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

Forte Biosciences  vs.  Adverum Biotechnologies

Forte Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forte Biosciences 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 July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Adverum Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adverum Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Forte Biosciences and Adverum Biotechnologies

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

The idea behind Forte Biosciences and Adverum Biotechnologies 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.