Correlation Between Kezar Life and Jazz Pharmaceuticals

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

Diversification Opportunities for Kezar Life and Jazz Pharmaceuticals

-0.28

Correlation Coefficient

Kezar Life  Jazz Pharmaceuticals

Very good diversification

The 3 months correlation between Kezar and Jazz is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences 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 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 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 Kezar Life i.e., Kezar Life and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Kezar Life and Jazz Pharmaceuticals

Considering the 90-day investment horizon Kezar Life Sciences is expected to under-perform the Jazz Pharmaceuticals. In addition to that, Kezar Life is 2.45 times more volatile than Jazz Pharmaceuticals PLC. It trades about -0.01 of its total potential returns per unit of risk. Jazz Pharmaceuticals PLC is currently generating about 0.01 per unit of volatility. If you would invest  12,314  in Jazz Pharmaceuticals PLC on October 20, 2024 and sell it today you would lose (196.00) from holding Jazz Pharmaceuticals PLC or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Kezar Life Sciences  vs.  Jazz Pharmaceuticals PLC

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 weak 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.

Jazz Pharmaceuticals PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jazz Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kezar Life and Jazz Pharmaceuticals

The main advantage of trading using opposite Kezar Life and Jazz Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kezar Life 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 Kezar Life Sciences 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..