Correlation Between Palo Alto and ZeroFox Holdings

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

By analyzing existing cross correlation between Palo Alto Networks and ZeroFox Holdings, you can compare the effects of market volatilities on Palo Alto and ZeroFox Holdings 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 Palo Alto with a short position of ZeroFox Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and ZeroFox Holdings.

Diversification Opportunities for Palo Alto and ZeroFox Holdings

0.26

Correlation Coefficient

Palo Alto  ZeroFox Holdings

Modest diversification

The 3 months correlation between Palo and ZeroFox is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and ZeroFox Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZeroFox Holdings and Palo Alto 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 Palo Alto Networks are associated (or correlated) with ZeroFox Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZeroFox Holdings has no effect on the direction of Palo Alto i.e., Palo Alto and ZeroFox Holdings go up and down completely randomly.

Pair Corralation between Palo Alto and ZeroFox Holdings

Given the investment horizon of 90 days Palo Alto Networks is expected to generate 0.36 times more return on investment than ZeroFox Holdings. However, Palo Alto Networks is 2.74 times less risky than ZeroFox Holdings. It trades about 0.1 of its potential returns per unit of risk. ZeroFox Holdings is currently generating about -0.11 per unit of risk. If you would invest  14,127  in Palo Alto Networks on September 13, 2024 and sell it today you would earn a total of  26,095  from holding Palo Alto Networks or generate 184.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	29.29%
Values	Daily Returns

Palo Alto Networks  vs.  ZeroFox Holdings

Palo Alto Networks

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Palo Alto showed solid returns over the last few months and may actually be approaching a breakup point.

ZeroFox Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZeroFox Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ZeroFox Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palo Alto and ZeroFox Holdings

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

The idea behind Palo Alto Networks and ZeroFox 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.