Correlation Between Nelnet and Zip Co

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

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

Diversification Opportunities for Nelnet and Zip Co

-0.54

Correlation Coefficient

Nelnet  Zip Co

Excellent diversification

The 3 months correlation between Nelnet and Zip is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nelnet Inc 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 Nelnet 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 Nelnet Inc 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 Nelnet i.e., Nelnet and Zip Co go up and down completely randomly.

Pair Corralation between Nelnet and Zip Co

Considering the 90-day investment horizon Nelnet Inc is expected to generate 0.34 times more return on investment than Zip Co. However, Nelnet Inc is 2.9 times less risky than Zip Co. It trades about 0.23 of its potential returns per unit of risk. Zip Co Limited is currently generating about -0.08 per unit of risk. If you would invest  10,543  in Nelnet Inc on December 2, 2024 and sell it today you would earn a total of  1,696  from holding Nelnet Inc or generate 16.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.02%
Values	Daily Returns

Nelnet Inc  vs.  Zip Co Limited

Nelnet Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nelnet Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Nelnet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Zip Co Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zip Co Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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 Nelnet and Zip Co

The main advantage of trading using opposite Nelnet and Zip Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nelnet 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 Nelnet Inc 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.