Correlation Between ZEN and OLT

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

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

Diversification Opportunities for ZEN and OLT

0.4

Correlation Coefficient

ZEN  OLT

Very weak diversification

The 3 months correlation between ZEN and OLT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ZEN and OLT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OLT and ZEN 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 ZEN are associated (or correlated) with OLT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OLT has no effect on the direction of ZEN i.e., ZEN and OLT go up and down completely randomly.

Pair Corralation between ZEN and OLT

Assuming the 90 days trading horizon ZEN is expected to under-perform the OLT. But the crypto coin apears to be less risky and, when comparing its historical volatility, ZEN is 1.96 times less risky than OLT. The crypto coin trades about -0.34 of its potential returns per unit of risk. The OLT is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.35  in OLT on January 29, 2024 and sell it today you would lose (0.05) from holding OLT or give up 15.46% of portfolio value over 90 days.

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

ZEN  vs.  OLT

ZEN

Risk-Adjusted Performance

4 of 100

Insignificant

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

OLT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OLT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, OLT may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ZEN and OLT

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

The idea behind ZEN and OLT 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.