Correlation Between Apple and Kezar Life

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

By analyzing existing cross correlation between Apple Inc and Kezar Life Sciences, you can compare the effects of market volatilities on Apple and Kezar Life 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 Apple with a short position of Kezar Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Kezar Life.

Diversification Opportunities for Apple and Kezar Life

0.05

Correlation Coefficient

Apple  Kezar Life

Significant diversification

The 3 months correlation between Apple and Kezar is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Kezar Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kezar Life Sciences and Apple 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 Apple Inc are associated (or correlated) with Kezar Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kezar Life Sciences has no effect on the direction of Apple i.e., Apple and Kezar Life go up and down completely randomly.

Pair Corralation between Apple and Kezar Life

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.27 times more return on investment than Kezar Life. However, Apple Inc is 3.68 times less risky than Kezar Life. It trades about 0.13 of its potential returns per unit of risk. Kezar Life Sciences is currently generating about 0.03 per unit of risk. If you would invest  19,500  in Apple Inc on September 21, 2024 and sell it today you would earn a total of  4,740  from holding Apple Inc or generate 24.31% return on investment over 90 days.

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

Apple Inc  vs.  Kezar Life Sciences

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kezar Life Sciences

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kezar Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kezar Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Kezar Life

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

The idea behind Apple Inc and Kezar Life Sciences 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.