Correlation Between FORTRESS BIOTECHPRFA and Federal Signal

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

By analyzing existing cross correlation between FORTRESS BIOTECHPRFA 25 and Federal Signal, you can compare the effects of market volatilities on FORTRESS BIOTECHPRFA and Federal Signal 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 BIOTECHPRFA with a short position of Federal Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORTRESS BIOTECHPRFA and Federal Signal.

Diversification Opportunities for FORTRESS BIOTECHPRFA and Federal Signal

0.52

Correlation Coefficient

FORTRESS BIOTECHPRFA  Federal Signal

Very weak diversification

The 3 months correlation between FORTRESS and Federal is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding FORTRESS BIOTECHPRFA 25 and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and FORTRESS BIOTECHPRFA 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 BIOTECHPRFA 25 are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of FORTRESS BIOTECHPRFA i.e., FORTRESS BIOTECHPRFA and Federal Signal go up and down completely randomly.

Pair Corralation between FORTRESS BIOTECHPRFA and Federal Signal

Assuming the 90 days trading horizon FORTRESS BIOTECHPRFA is expected to generate 1.37 times less return on investment than Federal Signal. In addition to that, FORTRESS BIOTECHPRFA is 1.36 times more volatile than Federal Signal. It trades about 0.1 of its total potential returns per unit of risk. Federal Signal is currently generating about 0.18 per unit of volatility. If you would invest  6,290  in Federal Signal on April 22, 2025 and sell it today you would earn a total of  2,860  from holding Federal Signal or generate 45.47% return on investment over 90 days.

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

FORTRESS BIOTECHPRFA 25  vs.  Federal Signal

FORTRESS BIOTECHPRFA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FORTRESS BIOTECHPRFA 25 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, FORTRESS BIOTECHPRFA reported solid returns over the last few months and may actually be approaching a breakup point.

Federal Signal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Signal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORTRESS BIOTECHPRFA and Federal Signal

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

The idea behind FORTRESS BIOTECHPRFA 25 and Federal Signal 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.