Correlation Between Generation Bio and Zentalis Pharmaceuticals

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

By analyzing existing cross correlation between Generation Bio Co and Zentalis Pharmaceuticals Llc, you can compare the effects of market volatilities on Generation Bio and Zentalis 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 Generation Bio with a short position of Zentalis Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generation Bio and Zentalis Pharmaceuticals.

Diversification Opportunities for Generation Bio and Zentalis Pharmaceuticals

0.12

Correlation Coefficient

Generation Bio  Zentalis Pharmaceuticals

Average diversification

The 3 months correlation between Generation and Zentalis is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Generation Bio Co and Zentalis Pharmaceuticals Llc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zentalis Pharmaceuticals and Generation Bio 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 Generation Bio Co are associated (or correlated) with Zentalis Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zentalis Pharmaceuticals has no effect on the direction of Generation Bio i.e., Generation Bio and Zentalis Pharmaceuticals go up and down completely randomly.

Pair Corralation between Generation Bio and Zentalis Pharmaceuticals

Given the investment horizon of 90 days Generation Bio Co is expected to under-perform the Zentalis Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Generation Bio Co is 1.22 times less risky than Zentalis Pharmaceuticals. The stock trades about -0.23 of its potential returns per unit of risk. The Zentalis Pharmaceuticals Llc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  368.00  in Zentalis Pharmaceuticals Llc on September 14, 2024 and sell it today you would lose (59.00) from holding Zentalis Pharmaceuticals Llc or give up 16.03% of portfolio value over 90 days.

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

Generation Bio Co  vs.  Zentalis Pharmaceuticals Llc

Generation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Bio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Zentalis Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zentalis Pharmaceuticals Llc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Generation Bio and Zentalis Pharmaceuticals

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

The idea behind Generation Bio Co and Zentalis Pharmaceuticals Llc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.