Correlation Between Gossamer Bio and Jazz Pharmaceuticals

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

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

Diversification Opportunities for Gossamer Bio and Jazz Pharmaceuticals

-0.65

Correlation Coefficient

Gossamer Bio  Jazz Pharmaceuticals

Excellent diversification

The 3 months correlation between Gossamer and Jazz is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gossamer Bio and Jazz Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals PLC and Gossamer 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 Gossamer Bio are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals PLC has no effect on the direction of Gossamer Bio i.e., Gossamer Bio and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Gossamer Bio and Jazz Pharmaceuticals

Given the investment horizon of 90 days Gossamer Bio is expected to generate 2.98 times more return on investment than Jazz Pharmaceuticals. However, Gossamer Bio is 2.98 times more volatile than Jazz Pharmaceuticals PLC. It trades about 0.02 of its potential returns per unit of risk. Jazz Pharmaceuticals PLC is currently generating about 0.01 per unit of risk. If you would invest  104.00  in Gossamer Bio on October 5, 2024 and sell it today you would lose (4.00) from holding Gossamer Bio or give up 3.85% of portfolio value over 90 days.

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

Gossamer Bio  vs.  Jazz Pharmaceuticals PLC

Gossamer Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gossamer Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gossamer Bio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Jazz Pharmaceuticals PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jazz Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gossamer Bio and Jazz Pharmaceuticals

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

The idea behind Gossamer Bio and Jazz Pharmaceuticals PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.