Correlation Between Nkarta and Zai Lab

Can any of the company-specific risk be diversified away by investing in both Nkarta and Zai Lab 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 Nkarta and Zai Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nkarta Inc and Zai Lab, you can compare the effects of market volatilities on Nkarta and Zai Lab 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 Nkarta with a short position of Zai Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nkarta and Zai Lab.

Diversification Opportunities for Nkarta and Zai Lab

-0.9

Correlation Coefficient

Nkarta  Zai Lab

Pay attention - limited upside

The 3 months correlation between Nkarta and Zai is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and Zai Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zai Lab and Nkarta 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 Nkarta Inc are associated (or correlated) with Zai Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zai Lab has no effect on the direction of Nkarta i.e., Nkarta and Zai Lab go up and down completely randomly.

Pair Corralation between Nkarta and Zai Lab

Given the investment horizon of 90 days Nkarta Inc is expected to under-perform the Zai Lab. In addition to that, Nkarta is 2.12 times more volatile than Zai Lab. It trades about -0.01 of its total potential returns per unit of risk. Zai Lab is currently generating about 0.17 per unit of volatility. If you would invest  2,647  in Zai Lab on December 28, 2024 and sell it today you would earn a total of  971.00  from holding Zai Lab or generate 36.68% return on investment over 90 days.

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

Nkarta Inc  vs.  Zai Lab

Nkarta Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nkarta is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Zai Lab

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zai Lab are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Zai Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nkarta and Zai Lab

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

The idea behind Nkarta Inc and Zai Lab 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.