Correlation Between Kezar Life and MEI Pharma

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

Diversification Opportunities for Kezar Life and MEI Pharma

0.38

Correlation Coefficient

Kezar Life  MEI Pharma

Weak diversification

The 3 months correlation between Kezar and MEI is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and MEI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEI Pharma 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 MEI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEI Pharma has no effect on the direction of Kezar Life i.e., Kezar Life and MEI Pharma go up and down completely randomly.

Pair Corralation between Kezar Life and MEI Pharma

Considering the 90-day investment horizon Kezar Life Sciences is expected to under-perform the MEI Pharma. In addition to that, Kezar Life is 1.33 times more volatile than MEI Pharma. It trades about -0.04 of its total potential returns per unit of risk. MEI Pharma is currently generating about -0.01 per unit of volatility. If you would invest  236.00  in MEI Pharma on December 23, 2024 and sell it today you would lose (6.00) from holding MEI Pharma or give up 2.54% of portfolio value over 90 days.

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

Kezar Life Sciences  vs.  MEI Pharma

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.

MEI Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days MEI Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, MEI Pharma is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kezar Life and MEI Pharma

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

The idea behind Kezar Life Sciences and MEI Pharma 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..