Correlation Between Zscaler and Palantir Technologies

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

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

Diversification Opportunities for Zscaler and Palantir Technologies

0.45

Correlation Coefficient

Zscaler  Palantir Technologies

Very weak diversification

The 3 months correlation between Zscaler and Palantir is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Zscaler and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies 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 Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of Zscaler i.e., Zscaler and Palantir Technologies go up and down completely randomly.

Pair Corralation between Zscaler and Palantir Technologies

Allowing for the 90-day total investment horizon Zscaler is expected to generate 6.38 times less return on investment than Palantir Technologies. But when comparing it to its historical volatility, Zscaler is 2.99 times less risky than Palantir Technologies. It trades about 0.17 of its potential returns per unit of risk. Palantir Technologies is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  4,270  in Palantir Technologies on August 20, 2024 and sell it today you would earn a total of  2,307  from holding Palantir Technologies or generate 54.03% return on investment over 90 days.

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

Zscaler  vs.  Palantir Technologies

Zscaler

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zscaler are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zscaler is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Palantir Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zscaler and Palantir Technologies

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

The idea behind Zscaler and Palantir Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.