Correlation Between Kezar Life and Atara Biotherapeutics

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

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

Diversification Opportunities for Kezar Life and Atara Biotherapeutics

0.06

Correlation Coefficient

Kezar Life  Atara Biotherapeutics

Significant diversification

The 3 months correlation between Kezar and Atara is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and Atara Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atara Biotherapeutics and Kezar Life 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 Kezar Life Sciences are associated (or correlated) with Atara Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atara Biotherapeutics has no effect on the direction of Kezar Life i.e., Kezar Life and Atara Biotherapeutics go up and down completely randomly.

Pair Corralation between Kezar Life and Atara Biotherapeutics

Considering the 90-day investment horizon Kezar Life Sciences is expected to under-perform the Atara Biotherapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Kezar Life Sciences is 2.81 times less risky than Atara Biotherapeutics. The stock trades about -0.29 of its potential returns per unit of risk. The Atara Biotherapeutics is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,133  in Atara Biotherapeutics on September 17, 2024 and sell it today you would lose (82.00) from holding Atara Biotherapeutics or give up 7.24% of portfolio value over 90 days.

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

Kezar Life Sciences  vs.  Atara Biotherapeutics

Kezar Life Sciences

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kezar Life Sciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Kezar Life reported solid returns over the last few months and may actually be approaching a breakup point.

Atara Biotherapeutics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atara Biotherapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Atara Biotherapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kezar Life and Atara Biotherapeutics

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

The idea behind Kezar Life Sciences and Atara Biotherapeutics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.