Correlation Between ZkSync and XPLA

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

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

Diversification Opportunities for ZkSync and XPLA

0.0

Correlation Coefficient

ZkSync  XPLA

Pay attention - limited upside

The 3 months correlation between ZkSync and XPLA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding zkSync and XPLA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPLA 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 XPLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPLA has no effect on the direction of ZkSync i.e., ZkSync and XPLA go up and down completely randomly.

Pair Corralation between ZkSync and XPLA

Assuming the 90 days horizon zkSync is expected to generate 1.92 times more return on investment than XPLA. However, ZkSync is 1.92 times more volatile than XPLA. It trades about 0.19 of its potential returns per unit of risk. XPLA is currently generating about 0.09 per unit of risk. If you would invest  10.00  in zkSync on September 3, 2024 and sell it today you would earn a total of  9.00  from holding zkSync or generate 90.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

zkSync  vs.  XPLA

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.

XPLA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XPLA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, XPLA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZkSync and XPLA

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

The idea behind zkSync and XPLA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .