Correlation Between Zapata Computing and Red Oak

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

By analyzing existing cross correlation between Zapata Computing Holdings and Red Oak Technology, you can compare the effects of market volatilities on Zapata Computing and Red Oak 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 Zapata Computing with a short position of Red Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zapata Computing and Red Oak.

Diversification Opportunities for Zapata Computing and Red Oak

-0.62

Correlation Coefficient

Zapata Computing  Red Oak

Excellent diversification

The 3 months correlation between Zapata and Red is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zapata Computing Holdings and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology and Zapata Computing 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 Zapata Computing Holdings are associated (or correlated) with Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of Zapata Computing i.e., Zapata Computing and Red Oak go up and down completely randomly.

Pair Corralation between Zapata Computing and Red Oak

Assuming the 90 days horizon Zapata Computing Holdings is expected to generate 82.24 times more return on investment than Red Oak. However, Zapata Computing is 82.24 times more volatile than Red Oak Technology. It trades about 0.12 of its potential returns per unit of risk. Red Oak Technology is currently generating about 0.1 per unit of risk. If you would invest  4.20  in Zapata Computing Holdings on August 31, 2024 and sell it today you would lose (3.64) from holding Zapata Computing Holdings or give up 86.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	65.08%
Values	Daily Returns

Zapata Computing Holdings  vs.  Red Oak Technology

Zapata Computing Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Zapata Computing Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly conflicting basic indicators, Zapata Computing showed solid returns over the last few months and may actually be approaching a breakup point.

Red Oak Technology

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Oak Technology are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Red Oak may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Zapata Computing and Red Oak

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

The idea behind Zapata Computing Holdings and Red Oak Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.