Correlation Between Zai Lab and Exelixis

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

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

Diversification Opportunities for Zai Lab and Exelixis

0.66

Correlation Coefficient

Zai Lab  Exelixis

Poor diversification

The 3 months correlation between Zai and Exelixis is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Zai Lab and Exelixis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelixis 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 Exelixis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelixis has no effect on the direction of Zai Lab i.e., Zai Lab and Exelixis go up and down completely randomly.

Pair Corralation between Zai Lab and Exelixis

Given the investment horizon of 90 days Zai Lab is expected to generate 2.98 times less return on investment than Exelixis. In addition to that, Zai Lab is 2.45 times more volatile than Exelixis. It trades about 0.01 of its total potential returns per unit of risk. Exelixis is currently generating about 0.1 per unit of volatility. If you would invest  1,619  in Exelixis on September 4, 2024 and sell it today you would earn a total of  1,940  from holding Exelixis or generate 119.83% return on investment over 90 days.

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

Zai Lab  vs.  Exelixis

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.

Exelixis

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exelixis are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Exelixis disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zai Lab and Exelixis

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

The idea behind Zai Lab and Exelixis 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.