Correlation Between Zip Co and Atlanticus Holdings

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

By analyzing existing cross correlation between Zip Co Limited and Atlanticus Holdings Corp, you can compare the effects of market volatilities on Zip Co and Atlanticus Holdings 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 Zip Co with a short position of Atlanticus Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zip Co and Atlanticus Holdings.

Diversification Opportunities for Zip Co and Atlanticus Holdings

0.69

Correlation Coefficient

Zip Co  Atlanticus Holdings

Poor diversification

The 3 months correlation between Zip and Atlanticus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zip Co Limited and Atlanticus Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlanticus Holdings Corp and Zip Co 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 Zip Co Limited are associated (or correlated) with Atlanticus Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlanticus Holdings Corp has no effect on the direction of Zip Co i.e., Zip Co and Atlanticus Holdings go up and down completely randomly.

Pair Corralation between Zip Co and Atlanticus Holdings

Assuming the 90 days horizon Zip Co Limited is expected to generate 7.11 times more return on investment than Atlanticus Holdings. However, Zip Co is 7.11 times more volatile than Atlanticus Holdings Corp. It trades about 0.14 of its potential returns per unit of risk. Atlanticus Holdings Corp is currently generating about 0.17 per unit of risk. If you would invest  157.00  in Zip Co Limited on September 5, 2024 and sell it today you would earn a total of  68.00  from holding Zip Co Limited or generate 43.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Zip Co Limited  vs.  Atlanticus Holdings Corp

Zip Co Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zip Co Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Zip Co reported solid returns over the last few months and may actually be approaching a breakup point.

Atlanticus Holdings Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlanticus Holdings Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Atlanticus Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zip Co and Atlanticus Holdings

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

The idea behind Zip Co Limited and Atlanticus Holdings Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.