Correlation Between Stoke Therapeutics and Zentalis Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Stoke 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 Stoke 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 Stoke Therapeutics and Zentalis Pharmaceuticals Llc, you can compare the effects of market volatilities on Stoke 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 Stoke Therapeutics with a short position of Zentalis Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stoke Therapeutics and Zentalis Pharmaceuticals.

Diversification Opportunities for Stoke Therapeutics and Zentalis Pharmaceuticals

0.33

Correlation Coefficient

Stoke Therapeutics  Zentalis Pharmaceuticals

Weak diversification

The 3 months correlation between Stoke and Zentalis is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Stoke 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 Stoke 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 Stoke 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 Stoke Therapeutics i.e., Stoke Therapeutics and Zentalis Pharmaceuticals go up and down completely randomly.

Pair Corralation between Stoke Therapeutics and Zentalis Pharmaceuticals

Given the investment horizon of 90 days Stoke Therapeutics is expected to under-perform the Zentalis Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Stoke Therapeutics is 1.61 times less risky than Zentalis Pharmaceuticals. The stock trades about -0.09 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  325.00  in Zentalis Pharmaceuticals Llc on September 4, 2024 and sell it today you would earn a total of  41.00  from holding Zentalis Pharmaceuticals Llc or generate 12.62% return on investment over 90 days.

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

Stoke Therapeutics  vs.  Zentalis Pharmaceuticals Llc

Stoke Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zentalis Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zentalis Pharmaceuticals Llc are ranked lower than 4 (%) 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 Stoke Therapeutics and Zentalis Pharmaceuticals

The main advantage of trading using opposite Stoke Therapeutics and Zentalis Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stoke 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 Stoke 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.