Correlation Between Kezar Life and C4 Therapeutics

Can any of the company-specific risk be diversified away by investing in both Kezar Life and C4 Therapeutics 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 C4 Therapeutics 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 C4 Therapeutics, you can compare the effects of market volatilities on Kezar Life and C4 Therapeutics 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 C4 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kezar Life and C4 Therapeutics.

Diversification Opportunities for Kezar Life and C4 Therapeutics

0.76

Correlation Coefficient

Kezar Life  C4 Therapeutics

Poor diversification

The 3 months correlation between Kezar and CCCC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and C4 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C4 Therapeutics 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 C4 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C4 Therapeutics has no effect on the direction of Kezar Life i.e., Kezar Life and C4 Therapeutics go up and down completely randomly.

Pair Corralation between Kezar Life and C4 Therapeutics

Considering the 90-day investment horizon Kezar Life Sciences is expected to under-perform the C4 Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Kezar Life Sciences is 2.0 times less risky than C4 Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The C4 Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  645.00  in C4 Therapeutics on October 26, 2024 and sell it today you would lose (282.00) from holding C4 Therapeutics or give up 43.72% of portfolio value over 90 days.

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

Kezar Life Sciences  vs.  C4 Therapeutics

Kezar Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kezar Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

C4 Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days C4 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kezar Life and C4 Therapeutics

The main advantage of trading using opposite Kezar Life and C4 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kezar Life position performs unexpectedly, C4 Therapeutics 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 C4 Therapeutics will offset losses from the drop in C4 Therapeutics' long position.

The idea behind Kezar Life Sciences and C4 Therapeutics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.