Correlation Between IQ and ZkSync

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

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

Diversification Opportunities for IQ and ZkSync

0.88

Correlation Coefficient

IQ  ZkSync

Very poor diversification

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

Pair Corralation between IQ and ZkSync

Assuming the 90 days horizon IQ is expected to generate 4.4 times less return on investment than ZkSync. But when comparing it to its historical volatility, IQ is 1.68 times less risky than ZkSync. It trades about 0.01 of its potential returns per unit of risk. zkSync is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13.00  in zkSync on August 4, 2024 and sell it today you would earn a total of  0.00  from holding zkSync or generate 0.0% return on investment over 90 days.

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

IQ  vs.  zkSync

IQ

Risk-Adjusted Performance

7 of 100

OK

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

zkSync

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in zkSync are ranked lower than 7 (%) 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.

Pair Trading with IQ and ZkSync

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

The idea behind IQ and zkSync 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.