Correlation Between Zai Lab and United Therapeutics
Can any of the company-specific risk be diversified away by investing in both Zai Lab and United Therapeutics 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 United Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zai Lab and United Therapeutics, you can compare the effects of market volatilities on Zai Lab and United Therapeutics 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 United Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zai Lab and United Therapeutics.
Diversification Opportunities for Zai Lab and United Therapeutics
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zai and United is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zai Lab and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics 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 United Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Therapeutics has no effect on the direction of Zai Lab i.e., Zai Lab and United Therapeutics go up and down completely randomly.
Pair Corralation between Zai Lab and United Therapeutics
Given the investment horizon of 90 days Zai Lab is expected to generate 2.42 times more return on investment than United Therapeutics. However, Zai Lab is 2.42 times more volatile than United Therapeutics. It trades about 0.17 of its potential returns per unit of risk. United Therapeutics is currently generating about 0.07 per unit of risk. If you would invest 1,935 in Zai Lab on August 31, 2024 and sell it today you would earn a total of 878.00 from holding Zai Lab or generate 45.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zai Lab vs. United Therapeutics
Performance |
| Timeline |
| Zai Lab |
| United Therapeutics |
Zai Lab and United Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zai Lab and United Therapeutics
The main advantage of trading using opposite Zai Lab and United Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zai Lab position performs unexpectedly, United Therapeutics 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 United Therapeutics will offset losses from the drop in United Therapeutics' long position.| Zai Lab vs. C4 Therapeutics | Zai Lab vs. Erasca Inc | Zai Lab vs. Cullinan Oncology LLC | Zai Lab vs. Legend Biotech Corp |
| United Therapeutics vs. Incyte | United Therapeutics vs. Alnylam Pharmaceuticals | United Therapeutics vs. Ultragenyx | United Therapeutics vs. Apellis Pharmaceuticals |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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