Correlation Between ODDITY Tech and Zapata Computing

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

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

Diversification Opportunities for ODDITY Tech and Zapata Computing

-0.8

Correlation Coefficient

ODDITY Tech  Zapata Computing

Pay attention - limited upside

The 3 months correlation between ODDITY and Zapata is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ODDITY Tech Ltd and Zapata Computing Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapata Computing Holdings and ODDITY Tech 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 ODDITY Tech Ltd are associated (or correlated) with Zapata Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapata Computing Holdings has no effect on the direction of ODDITY Tech i.e., ODDITY Tech and Zapata Computing go up and down completely randomly.

Pair Corralation between ODDITY Tech and Zapata Computing

Considering the 90-day investment horizon ODDITY Tech Ltd is expected to generate 0.16 times more return on investment than Zapata Computing. However, ODDITY Tech Ltd is 6.33 times less risky than Zapata Computing. It trades about 0.14 of its potential returns per unit of risk. Zapata Computing Holdings is currently generating about -0.27 per unit of risk. If you would invest  3,680  in ODDITY Tech Ltd on August 30, 2024 and sell it today you would earn a total of  1,001  from holding ODDITY Tech Ltd or generate 27.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	71.88%
Values	Daily Returns

ODDITY Tech Ltd  vs.  Zapata Computing Holdings

ODDITY Tech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, ODDITY Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Zapata Computing Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zapata Computing Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ODDITY Tech and Zapata Computing

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

The idea behind ODDITY Tech Ltd and Zapata Computing Holdings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.