Correlation Between Ocular Therapeutix and Kezar Life

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

By analyzing existing cross correlation between Ocular Therapeutix and Kezar Life Sciences, you can compare the effects of market volatilities on Ocular Therapeutix and Kezar Life 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 Ocular Therapeutix with a short position of Kezar Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocular Therapeutix and Kezar Life.

Diversification Opportunities for Ocular Therapeutix and Kezar Life

0.56

Correlation Coefficient

Ocular Therapeutix  Kezar Life

Very weak diversification

The 3 months correlation between Ocular and Kezar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ocular Therapeutix and Kezar Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kezar Life Sciences and Ocular Therapeutix 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 Ocular Therapeutix are associated (or correlated) with Kezar Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kezar Life Sciences has no effect on the direction of Ocular Therapeutix i.e., Ocular Therapeutix and Kezar Life go up and down completely randomly.

Pair Corralation between Ocular Therapeutix and Kezar Life

Given the investment horizon of 90 days Ocular Therapeutix is expected to generate 7.89 times less return on investment than Kezar Life. But when comparing it to its historical volatility, Ocular Therapeutix is 1.72 times less risky than Kezar Life. It trades about 0.01 of its potential returns per unit of risk. Kezar Life Sciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  575.00  in Kezar Life Sciences on September 17, 2024 and sell it today you would earn a total of  100.00  from holding Kezar Life Sciences or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Ocular Therapeutix  vs.  Kezar Life Sciences

Ocular Therapeutix

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Ocular Therapeutix is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Kezar Life Sciences

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kezar Life Sciences are ranked lower than 5 (%) 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.

Pair Trading with Ocular Therapeutix and Kezar Life

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

The idea behind Ocular Therapeutix and Kezar Life Sciences 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.