Correlation Between Applied Digital and ZOO Digital

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

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

Diversification Opportunities for Applied Digital and ZOO Digital

0.39

Correlation Coefficient

Applied Digital  ZOO Digital

Weak diversification

The 3 months correlation between Applied and ZOO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and ZOO Digital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOO Digital Group and Applied Digital 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 Applied Digital are associated (or correlated) with ZOO Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOO Digital Group has no effect on the direction of Applied Digital i.e., Applied Digital and ZOO Digital go up and down completely randomly.

Pair Corralation between Applied Digital and ZOO Digital

Given the investment horizon of 90 days Applied Digital is expected to generate 0.96 times more return on investment than ZOO Digital. However, Applied Digital is 1.05 times less risky than ZOO Digital. It trades about -0.01 of its potential returns per unit of risk. ZOO Digital Group is currently generating about -0.13 per unit of risk. If you would invest  839.00  in Applied Digital on December 27, 2024 and sell it today you would lose (186.00) from holding Applied Digital or give up 22.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Applied Digital  vs.  ZOO Digital Group

Applied Digital

Risk-Adjusted Performance

Very Weak

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

ZOO Digital Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZOO Digital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Applied Digital and ZOO Digital

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

The idea behind Applied Digital and ZOO Digital Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.