Correlation Between Ford and Zai Lab
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Zai Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Zai Lab, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Zai Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Zai Lab.
Diversification Opportunities for Ford and Zai Lab
Significant diversification
The 3 months correlation between Ford and Zai is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Zai Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zai Lab and Ford 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 Ford Motor 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 Ford i.e., Ford and Zai Lab go up and down completely randomly.
Pair Corralation between Ford and Zai Lab
Taking into account the 90-day investment horizon Ford is expected to generate 7.81 times less return on investment than Zai Lab. But when comparing it to its historical volatility, Ford Motor is 2.04 times less risky than Zai Lab. It trades about 0.05 of its potential returns per unit of risk. Zai Lab is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,876 in Zai Lab on August 28, 2024 and sell it today you would earn a total of 933.00 from holding Zai Lab or generate 49.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Zai Lab
Performance |
| Timeline |
| Ford Motor |
| Zai Lab |
Ford and Zai Lab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Zai Lab
The main advantage of trading using opposite Ford and Zai Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |