Correlation Between Zai Lab and Texas Capital

Can any of the company-specific risk be diversified away by investing in both Zai Lab and Texas Capital 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 Zai Lab and Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zai Lab and Texas Capital Bancshares, you can compare the effects of market volatilities on Zai Lab and Texas Capital 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 Zai Lab with a short position of Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zai Lab and Texas Capital.

Diversification Opportunities for Zai Lab and Texas Capital

0.06

Correlation Coefficient

Zai Lab  Texas Capital

Significant diversification

The 3 months correlation between Zai and Texas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Zai Lab and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares and Zai Lab 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 Zai Lab are associated (or correlated) with Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of Zai Lab i.e., Zai Lab and Texas Capital go up and down completely randomly.

Pair Corralation between Zai Lab and Texas Capital

Given the investment horizon of 90 days Zai Lab is expected to generate 2.02 times more return on investment than Texas Capital. However, Zai Lab is 2.02 times more volatile than Texas Capital Bancshares. It trades about 0.06 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about -0.04 per unit of risk. If you would invest  2,738  in Zai Lab on February 3, 2025 and sell it today you would earn a total of  380.00  from holding Zai Lab or generate 13.88% return on investment over 90 days.

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

Zai Lab  vs.  Texas Capital Bancshares

Zai Lab

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zai Lab are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Zai Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

Texas Capital Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Zai Lab and Texas Capital

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

The idea behind Zai Lab and Texas Capital Bancshares 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.