Correlation Between Kezar Life and CytomX Therapeutics

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

Diversification Opportunities for Kezar Life and CytomX Therapeutics

0.86

Correlation Coefficient

Kezar Life  CytomX Therapeutics

Very poor diversification

The 3 months correlation between Kezar and CytomX is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and CytomX Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CytomX 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 CytomX Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CytomX Therapeutics has no effect on the direction of Kezar Life i.e., Kezar Life and CytomX Therapeutics go up and down completely randomly.

Pair Corralation between Kezar Life and CytomX Therapeutics

Considering the 90-day investment horizon Kezar Life Sciences is expected to generate 0.56 times more return on investment than CytomX Therapeutics. However, Kezar Life Sciences is 1.8 times less risky than CytomX Therapeutics. It trades about -0.06 of its potential returns per unit of risk. CytomX Therapeutics is currently generating about -0.17 per unit of risk. If you would invest  684.00  in Kezar Life Sciences on December 25, 2024 and sell it today you would lose (68.00) from holding Kezar Life Sciences or give up 9.94% of portfolio value over 90 days.

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

Kezar Life Sciences  vs.  CytomX Therapeutics

Kezar Life Sciences

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CytomX Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days CytomX Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kezar Life and CytomX Therapeutics

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

The idea behind Kezar Life Sciences and CytomX 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.