Correlation Between Zentalis Pharmaceuticals and Passage Bio

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

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

Diversification Opportunities for Zentalis Pharmaceuticals and Passage Bio

0.28

Correlation Coefficient

Zentalis Pharmaceuticals  Passage Bio

Modest diversification

The 3 months correlation between Zentalis and Passage is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zentalis Pharmaceuticals Llc and Passage Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Passage Bio and Zentalis Pharmaceuticals 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 Zentalis Pharmaceuticals Llc are associated (or correlated) with Passage Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Passage Bio has no effect on the direction of Zentalis Pharmaceuticals i.e., Zentalis Pharmaceuticals and Passage Bio go up and down completely randomly.

Pair Corralation between Zentalis Pharmaceuticals and Passage Bio

Given the investment horizon of 90 days Zentalis Pharmaceuticals Llc is expected to under-perform the Passage Bio. But the stock apears to be less risky and, when comparing its historical volatility, Zentalis Pharmaceuticals Llc is 2.89 times less risky than Passage Bio. The stock trades about -0.14 of its potential returns per unit of risk. The Passage Bio is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Passage Bio on September 14, 2024 and sell it today you would earn a total of  20.00  from holding Passage Bio or generate 34.48% return on investment over 90 days.

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

Zentalis Pharmaceuticals Llc  vs.  Passage Bio

Zentalis Pharmaceuticals

Risk-Adjusted Performance

0 of 100

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 quite persistent basic indicators, Zentalis Pharmaceuticals is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Passage Bio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zentalis Pharmaceuticals and Passage Bio

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

The idea behind Zentalis Pharmaceuticals Llc and Passage Bio 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.