Correlation Between Passage Bio and Zentalis Pharmaceuticals

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

By analyzing existing cross correlation between Passage Bio and Zentalis Pharmaceuticals Llc, you can compare the effects of market volatilities on Passage Bio and Zentalis 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 Passage Bio with a short position of Zentalis Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Passage Bio and Zentalis Pharmaceuticals.

Diversification Opportunities for Passage Bio and Zentalis Pharmaceuticals

0.72

Correlation Coefficient

Passage Bio  Zentalis Pharmaceuticals

Poor diversification

The 3 months correlation between Passage and Zentalis is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Zentalis Pharmaceuticals Llc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zentalis Pharmaceuticals and Passage Bio 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 Passage Bio are associated (or correlated) with Zentalis Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zentalis Pharmaceuticals has no effect on the direction of Passage Bio i.e., Passage Bio and Zentalis Pharmaceuticals go up and down completely randomly.

Pair Corralation between Passage Bio and Zentalis Pharmaceuticals

Given the investment horizon of 90 days Passage Bio is expected to generate 1.0 times more return on investment than Zentalis Pharmaceuticals. However, Passage Bio is 1.0 times more volatile than Zentalis Pharmaceuticals Llc. It trades about -0.07 of its potential returns per unit of risk. Zentalis Pharmaceuticals Llc is currently generating about -0.09 per unit of risk. If you would invest  75.00  in Passage Bio on December 4, 2024 and sell it today you would lose (27.00) from holding Passage Bio or give up 36.0% of portfolio value over 90 days.

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

Passage Bio  vs.  Zentalis Pharmaceuticals Llc

Passage Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Passage Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zentalis Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zentalis Pharmaceuticals Llc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Passage Bio and Zentalis Pharmaceuticals

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

The idea behind Passage Bio and Zentalis Pharmaceuticals Llc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.