Correlation Between Applied Digital and ZEN Graphene

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

By analyzing existing cross correlation between Applied Digital and ZEN Graphene Solutions, you can compare the effects of market volatilities on Applied Digital and ZEN Graphene 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 ZEN Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and ZEN Graphene.

Diversification Opportunities for Applied Digital and ZEN Graphene

0.14

Correlation Coefficient

Applied Digital  ZEN Graphene

Average diversification

The 3 months correlation between Applied and ZEN is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and ZEN Graphene Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZEN Graphene Solutions 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 ZEN Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZEN Graphene Solutions has no effect on the direction of Applied Digital i.e., Applied Digital and ZEN Graphene go up and down completely randomly.

Pair Corralation between Applied Digital and ZEN Graphene

Given the investment horizon of 90 days Applied Digital is expected to under-perform the ZEN Graphene. In addition to that, Applied Digital is 1.4 times more volatile than ZEN Graphene Solutions. It trades about 0.0 of its total potential returns per unit of risk. ZEN Graphene Solutions is currently generating about 0.1 per unit of volatility. If you would invest  97.00  in ZEN Graphene Solutions on December 28, 2024 and sell it today you would earn a total of  27.00  from holding ZEN Graphene Solutions or generate 27.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Applied Digital  vs.  ZEN Graphene Solutions

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.

ZEN Graphene Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZEN Graphene Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, ZEN Graphene disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Digital and ZEN Graphene

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

The idea behind Applied Digital and ZEN Graphene Solutions 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.