Can any of the company-specific risk be diversified away by investing in both Kezar Life and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC ADR, you can compare the effects of market volatilities on Kezar Life and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kezar Life and AstraZeneca PLC.
Diversification Opportunities for Kezar Life and AstraZeneca PLC
The 3 months correlation between Kezar and AstraZeneca is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Kezar Life i.e., Kezar Life and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Kezar Life and AstraZeneca PLC
Considering the 90-day investment horizon Kezar Life Sciences is expected to under-perform the AstraZeneca PLC. In addition to that, Kezar Life is 3.06 times more volatile than AstraZeneca PLC ADR. It trades about -0.09 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.03 per unit of volatility. If you would invest 7,226 in AstraZeneca PLC ADR on March 6, 2024 and sell it today you would earn a total of 673.00 from holding AstraZeneca PLC ADR or generate 9.31% return on investment over 90 days.
Over the last 90 days Kezar Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, AstraZeneca PLC displayed solid returns over the last few months and may actually be approaching a breakup point.