Correlation Between Kezar Life and Nuvation Bio

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

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

Diversification Opportunities for Kezar Life and Nuvation Bio

-0.39

Correlation Coefficient

Kezar Life  Nuvation Bio

Very good diversification

The 3 months correlation between Kezar and Nuvation is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio and Kezar Life 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 Kezar Life Sciences are associated (or correlated) with Nuvation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvation Bio has no effect on the direction of Kezar Life i.e., Kezar Life and Nuvation Bio go up and down completely randomly.

Pair Corralation between Kezar Life and Nuvation Bio

Considering the 90-day investment horizon Kezar Life Sciences is expected to generate 0.87 times more return on investment than Nuvation Bio. However, Kezar Life Sciences is 1.15 times less risky than Nuvation Bio. It trades about 0.11 of its potential returns per unit of risk. Nuvation Bio is currently generating about -0.01 per unit of risk. If you would invest  80.00  in Kezar Life Sciences on February 5, 2024 and sell it today you would earn a total of  6.00  from holding Kezar Life Sciences or generate 7.5% return on investment over 90 days.

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

Kezar Life Sciences  vs.  Nuvation Bio

Kezar Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kezar Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Kezar Life is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Nuvation Bio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nuvation Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kezar Life and Nuvation Bio

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

The idea behind Kezar Life Sciences and Nuvation Bio 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.