Correlation Between Open Lending and Zip Co

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

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

Diversification Opportunities for Open Lending and Zip Co

0.67

Correlation Coefficient

Open Lending  Zip Co

Poor diversification

The 3 months correlation between Open and Zip is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Open Lending Corp and Zip Co Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zip Co Limited and Open Lending 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 Open Lending Corp are associated (or correlated) with Zip Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zip Co Limited has no effect on the direction of Open Lending i.e., Open Lending and Zip Co go up and down completely randomly.

Pair Corralation between Open Lending and Zip Co

Given the investment horizon of 90 days Open Lending is expected to generate 3.48 times less return on investment than Zip Co. But when comparing it to its historical volatility, Open Lending Corp is 1.49 times less risky than Zip Co. It trades about 0.06 of its potential returns per unit of risk. Zip Co Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Zip Co Limited on September 4, 2024 and sell it today you would earn a total of  68.00  from holding Zip Co Limited or generate 43.31% return on investment over 90 days.

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

Open Lending Corp  vs.  Zip Co Limited

Open Lending Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Open Lending Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Open Lending may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zip Co Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zip Co Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zip Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Open Lending and Zip Co

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

The idea behind Open Lending Corp and Zip Co Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.