Correlation Between Analog Devices and Zendesk

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

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

Diversification Opportunities for Analog Devices and Zendesk

0.04

Correlation Coefficient

Analog Devices  Zendesk

Significant diversification

The 3 months correlation between Analog and Zendesk is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Zendesk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zendesk and Analog Devices 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 Analog Devices are associated (or correlated) with Zendesk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zendesk has no effect on the direction of Analog Devices i.e., Analog Devices and Zendesk go up and down completely randomly.

Pair Corralation between Analog Devices and Zendesk

Considering the 90-day investment horizon Analog Devices is expected to generate 0.53 times more return on investment than Zendesk. However, Analog Devices is 1.89 times less risky than Zendesk. It trades about 0.04 of its potential returns per unit of risk. Zendesk is currently generating about -0.04 per unit of risk. If you would invest  15,782  in Analog Devices on February 6, 2024 and sell it today you would earn a total of  4,181  from holding Analog Devices or generate 26.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.67%
Values	Daily Returns

Analog Devices  vs.  Zendesk

Analog Devices

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Analog Devices may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Zendesk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zendesk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Zendesk is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and Zendesk

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

The idea behind Analog Devices and Zendesk 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.