Correlation Between Kezar Life and Cue Biopharma

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

Diversification Opportunities for Kezar Life and Cue Biopharma

0.69

Correlation Coefficient

Kezar Life  Cue Biopharma

Poor diversification

The 3 months correlation between Kezar and Cue is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and Cue Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cue Biopharma 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 Cue Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cue Biopharma has no effect on the direction of Kezar Life i.e., Kezar Life and Cue Biopharma go up and down completely randomly.

Pair Corralation between Kezar Life and Cue Biopharma

Considering the 90-day investment horizon Kezar Life is expected to generate 2.78 times less return on investment than Cue Biopharma. But when comparing it to its historical volatility, Kezar Life Sciences is 1.89 times less risky than Cue Biopharma. It trades about 0.09 of its potential returns per unit of risk. Cue Biopharma is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  66.00  in Cue Biopharma on September 2, 2024 and sell it today you would earn a total of  56.00  from holding Cue Biopharma or generate 84.85% return on investment over 90 days.

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

Kezar Life Sciences  vs.  Cue Biopharma

Kezar Life Sciences

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kezar Life Sciences are ranked lower than 7 (%) 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.

Cue Biopharma

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cue Biopharma are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cue Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kezar Life and Cue Biopharma

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

The idea behind Kezar Life Sciences and Cue Biopharma 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.