Correlation Between PepGen and Zai Lab

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

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

Diversification Opportunities for PepGen and Zai Lab

-0.29

Correlation Coefficient

PepGen  Zai Lab

Very good diversification

The 3 months correlation between PepGen and Zai is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding PepGen and Zai Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zai Lab and PepGen 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 PepGen 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 PepGen i.e., PepGen and Zai Lab go up and down completely randomly.

Pair Corralation between PepGen and Zai Lab

Given the investment horizon of 90 days PepGen is expected to under-perform the Zai Lab. In addition to that, PepGen is 4.4 times more volatile than Zai Lab. It trades about -0.04 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

PepGen  vs.  Zai Lab

PepGen

Risk-Adjusted Performance

Very Weak

Over the last 90 days PepGen 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.

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 PepGen and Zai Lab

The main advantage of trading using opposite PepGen and Zai Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepGen 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 PepGen 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.