Correlation Between Kezar Life and Tonix Pharmaceuticals

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

Diversification Opportunities for Kezar Life and Tonix Pharmaceuticals

-0.61

Correlation Coefficient

Kezar Life  Tonix Pharmaceuticals

Excellent diversification

The 3 months correlation between Kezar and Tonix is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences and Tonix Pharmaceuticals Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tonix Pharmaceuticals 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 Tonix Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tonix Pharmaceuticals has no effect on the direction of Kezar Life i.e., Kezar Life and Tonix Pharmaceuticals go up and down completely randomly.

Pair Corralation between Kezar Life and Tonix Pharmaceuticals

Considering the 90-day investment horizon Kezar Life Sciences is expected to generate 0.34 times more return on investment than Tonix Pharmaceuticals. However, Kezar Life Sciences is 2.9 times less risky than Tonix Pharmaceuticals. It trades about -0.01 of its potential returns per unit of risk. Tonix Pharmaceuticals Holding is currently generating about -0.06 per unit of risk. If you would invest  893.00  in Kezar Life Sciences on October 21, 2024 and sell it today you would lose (274.00) from holding Kezar Life Sciences or give up 30.68% of portfolio value over 90 days.

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

Kezar Life Sciences  vs.  Tonix Pharmaceuticals Holding

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.

Tonix Pharmaceuticals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tonix Pharmaceuticals Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Tonix Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kezar Life and Tonix Pharmaceuticals

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

The idea behind Kezar Life Sciences and Tonix Pharmaceuticals Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.