Correlation Between CSL and Zai Lab
Can any of the company-specific risk be diversified away by investing in both CSL and Zai Lab 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 CSL and Zai Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Zai Lab, you can compare the effects of market volatilities on CSL and Zai Lab 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 CSL with a short position of Zai Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Zai Lab.
Diversification Opportunities for CSL and Zai Lab
Excellent diversification
The 3 months correlation between CSL and Zai is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Zai Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zai Lab and CSL 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 CSL are associated (or correlated) with Zai Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zai Lab has no effect on the direction of CSL i.e., CSL and Zai Lab go up and down completely randomly.
Pair Corralation between CSL and Zai Lab
Assuming the 90 days horizon CSL is expected to under-perform the Zai Lab. But the pink sheet apears to be less risky and, when comparing its historical volatility, CSL is 3.15 times less risky than Zai Lab. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Zai Lab is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,962 in Zai Lab on September 1, 2024 and sell it today you would lose (1,077) from holding Zai Lab or give up 27.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Zai Lab
Performance |
| Timeline |
| CSL |
| Zai Lab |
CSL and Zai Lab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Zai Lab
The main advantage of trading using opposite CSL and Zai Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, Zai Lab 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 Zai Lab will offset losses from the drop in Zai Lab's long position.The idea behind CSL and Zai Lab 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.| Zai Lab vs. C4 Therapeutics | Zai Lab vs. Erasca Inc | Zai Lab vs. Cullinan Oncology LLC | Zai Lab vs. Legend Biotech Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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