Correlation Between Relay Therapeutics and Zentalis Pharmaceuticals

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

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

Diversification Opportunities for Relay Therapeutics and Zentalis Pharmaceuticals

0.12

Correlation Coefficient

Relay Therapeutics  Zentalis Pharmaceuticals

Average diversification

The 3 months correlation between Relay and Zentalis is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Relay Therapeutics and Zentalis Pharmaceuticals Llc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zentalis Pharmaceuticals and Relay Therapeutics 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 Relay Therapeutics 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 Relay Therapeutics i.e., Relay Therapeutics and Zentalis Pharmaceuticals go up and down completely randomly.

Pair Corralation between Relay Therapeutics and Zentalis Pharmaceuticals

Given the investment horizon of 90 days Relay Therapeutics is expected to under-perform the Zentalis Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Relay Therapeutics is 1.82 times less risky than Zentalis Pharmaceuticals. The stock trades about -0.24 of its potential returns per unit of risk. The Zentalis Pharmaceuticals Llc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  315.00  in Zentalis Pharmaceuticals Llc on September 12, 2024 and sell it today you would earn a total of  46.00  from holding Zentalis Pharmaceuticals Llc or generate 14.6% return on investment over 90 days.

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

Relay Therapeutics  vs.  Zentalis Pharmaceuticals Llc

Relay Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relay Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zentalis Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zentalis Pharmaceuticals Llc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Zentalis Pharmaceuticals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Relay Therapeutics and Zentalis Pharmaceuticals

The main advantage of trading using opposite Relay Therapeutics and Zentalis Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relay Therapeutics 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 Relay Therapeutics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.