Correlation Between Zai Lab and American Funds

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

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

Diversification Opportunities for Zai Lab and American Funds

-0.66

Correlation Coefficient

Zai Lab  American Funds

Excellent diversification

The 3 months correlation between Zai and American is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Zai Lab and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and Zai Lab 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 Zai Lab are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Zai Lab i.e., Zai Lab and American Funds go up and down completely randomly.

Pair Corralation between Zai Lab and American Funds

Given the investment horizon of 90 days Zai Lab is expected to generate 2.44 times more return on investment than American Funds. However, Zai Lab is 2.44 times more volatile than American Funds Growth. It trades about 0.15 of its potential returns per unit of risk. American Funds Growth is currently generating about -0.1 per unit of risk. If you would invest  2,722  in Zai Lab on December 25, 2024 and sell it today you would earn a total of  787.00  from holding Zai Lab or generate 28.91% return on investment over 90 days.

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

Zai Lab  vs.  American Funds Growth

Zai Lab

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zai Lab are ranked lower than 11 (%) 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.

American Funds Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Zai Lab and American Funds

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

The idea behind Zai Lab and American Funds Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.