Correlation Between Pendle and ZkSync

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

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

Diversification Opportunities for Pendle and ZkSync

0.89

Correlation Coefficient

Pendle  ZkSync

Very poor diversification

The 3 months correlation between Pendle and ZkSync is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pendle and zkSync in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on zkSync and Pendle 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 Pendle are associated (or correlated) with ZkSync. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of zkSync has no effect on the direction of Pendle i.e., Pendle and ZkSync go up and down completely randomly.

Pair Corralation between Pendle and ZkSync

Assuming the 90 days trading horizon Pendle is expected to generate 0.96 times more return on investment than ZkSync. However, Pendle is 1.04 times less risky than ZkSync. It trades about 0.2 of its potential returns per unit of risk. zkSync is currently generating about 0.19 per unit of risk. If you would invest  285.00  in Pendle on September 2, 2024 and sell it today you would earn a total of  292.00  from holding Pendle or generate 102.46% return on investment over 90 days.

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

Pendle  vs.  zkSync

Pendle

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pendle are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Pendle sustained solid returns over the last few months and may actually be approaching a breakup point.

zkSync

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in zkSync are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ZkSync exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pendle and ZkSync

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

The idea behind Pendle and zkSync 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.