Correlation Between ZSC and SafePal

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

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

Diversification Opportunities for ZSC and SafePal

0.12

Correlation Coefficient

ZSC  SafePal

Average diversification

The 3 months correlation between ZSC and SafePal is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ZSC and SafePal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SafePal and ZSC 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 ZSC are associated (or correlated) with SafePal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SafePal has no effect on the direction of ZSC i.e., ZSC and SafePal go up and down completely randomly.

Pair Corralation between ZSC and SafePal

Assuming the 90 days trading horizon ZSC is expected to generate 12.33 times more return on investment than SafePal. However, ZSC is 12.33 times more volatile than SafePal. It trades about 0.15 of its potential returns per unit of risk. SafePal is currently generating about 0.03 per unit of risk. If you would invest  0.01  in ZSC on September 3, 2024 and sell it today you would lose  0.00  from holding ZSC or give up 40.82% of portfolio value over 90 days.

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

ZSC  vs.  SafePal

ZSC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZSC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ZSC exhibited solid returns over the last few months and may actually be approaching a breakup point.

SafePal

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SafePal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SafePal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ZSC and SafePal

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

The idea behind ZSC and SafePal 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.