Correlation Between ZkSync and Compound Governance

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

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

Diversification Opportunities for ZkSync and Compound Governance

0.82

Correlation Coefficient

ZkSync  Compound Governance

Very poor diversification

The 3 months correlation between ZkSync and Compound is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding zkSync and Compound Governance Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compound Governance Token and ZkSync 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 zkSync are associated (or correlated) with Compound Governance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compound Governance Token has no effect on the direction of ZkSync i.e., ZkSync and Compound Governance go up and down completely randomly.

Pair Corralation between ZkSync and Compound Governance

Assuming the 90 days horizon zkSync is expected to generate 1.42 times more return on investment than Compound Governance. However, ZkSync is 1.42 times more volatile than Compound Governance Token. It trades about 0.19 of its potential returns per unit of risk. Compound Governance Token is currently generating about 0.2 per unit of risk. If you would invest  9.85  in zkSync on September 2, 2024 and sell it today you would earn a total of  9.15  from holding zkSync or generate 92.89% return on investment over 90 days.

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

zkSync  vs.  Compound Governance Token

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.

Compound Governance Token

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compound Governance Token are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Compound Governance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZkSync and Compound Governance

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

The idea behind zkSync and Compound Governance Token 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.