Correlation Between Zai Lab and Alnylam Pharmaceuticals

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

By analyzing existing cross correlation between Zai Lab and Alnylam Pharmaceuticals, you can compare the effects of market volatilities on Zai Lab and Alnylam Pharmaceuticals 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 Alnylam Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zai Lab and Alnylam Pharmaceuticals.

Diversification Opportunities for Zai Lab and Alnylam Pharmaceuticals

0.25

Correlation Coefficient

Zai Lab  Alnylam Pharmaceuticals

Modest diversification

The 3 months correlation between Zai and Alnylam is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zai Lab and Alnylam Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alnylam Pharmaceuticals 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 Alnylam Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alnylam Pharmaceuticals has no effect on the direction of Zai Lab i.e., Zai Lab and Alnylam Pharmaceuticals go up and down completely randomly.

Pair Corralation between Zai Lab and Alnylam Pharmaceuticals

Given the investment horizon of 90 days Zai Lab is expected to generate 1.89 times more return on investment than Alnylam Pharmaceuticals. However, Zai Lab is 1.89 times more volatile than Alnylam Pharmaceuticals. It trades about 0.17 of its potential returns per unit of risk. Alnylam Pharmaceuticals is currently generating about 0.01 per unit of risk. If you would invest  1,976  in Zai Lab on September 4, 2024 and sell it today you would earn a total of  944.00  from holding Zai Lab or generate 47.77% return on investment over 90 days.

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

Zai Lab  vs.  Alnylam Pharmaceuticals

Zai Lab

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zai Lab are ranked lower than 13 (%) 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.

Alnylam Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alnylam Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alnylam Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zai Lab and Alnylam Pharmaceuticals

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

The idea behind Zai Lab and Alnylam Pharmaceuticals 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.