Correlation Between Avalanche and ZetaChain

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

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

Diversification Opportunities for Avalanche and ZetaChain

0.85

Correlation Coefficient

Avalanche  ZetaChain

Very poor diversification

The 3 months correlation between Avalanche and ZetaChain is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and ZetaChain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZetaChain and Avalanche 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 Avalanche are associated (or correlated) with ZetaChain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZetaChain has no effect on the direction of Avalanche i.e., Avalanche and ZetaChain go up and down completely randomly.

Pair Corralation between Avalanche and ZetaChain

Assuming the 90 days trading horizon Avalanche is expected to generate 0.65 times more return on investment than ZetaChain. However, Avalanche is 1.54 times less risky than ZetaChain. It trades about 0.02 of its potential returns per unit of risk. ZetaChain is currently generating about -0.01 per unit of risk. If you would invest  2,580  in Avalanche on April 21, 2025 and sell it today you would lose (136.00) from holding Avalanche or give up 5.27% of portfolio value over 90 days.

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

Avalanche  vs.  ZetaChain

Avalanche

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.

ZetaChain

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZetaChain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ZetaChain is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avalanche and ZetaChain

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

The idea behind Avalanche and ZetaChain 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.