Correlation Between Zscaler and Crowdstrike Holdings

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

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

Diversification Opportunities for Zscaler and Crowdstrike Holdings

0.88

Correlation Coefficient

Zscaler  Crowdstrike Holdings

Very poor diversification

The 3 months correlation between Zscaler and Crowdstrike is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Zscaler and Crowdstrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crowdstrike Holdings and Zscaler 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 Zscaler are associated (or correlated) with Crowdstrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crowdstrike Holdings has no effect on the direction of Zscaler i.e., Zscaler and Crowdstrike Holdings go up and down completely randomly.

Pair Corralation between Zscaler and Crowdstrike Holdings

Allowing for the 90-day total investment horizon Zscaler is expected to generate 2.8 times less return on investment than Crowdstrike Holdings. In addition to that, Zscaler is 1.28 times more volatile than Crowdstrike Holdings. It trades about 0.05 of its total potential returns per unit of risk. Crowdstrike Holdings is currently generating about 0.18 per unit of volatility. If you would invest  26,660  in Crowdstrike Holdings on September 1, 2024 and sell it today you would earn a total of  7,937  from holding Crowdstrike Holdings or generate 29.77% return on investment over 90 days.

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

Zscaler  vs.  Crowdstrike Holdings

Zscaler

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zscaler are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Zscaler may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Crowdstrike Holdings

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Zscaler and Crowdstrike Holdings

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

The idea behind Zscaler and Crowdstrike Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.