Correlation Between ZCash and FARM

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

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

Diversification Opportunities for ZCash and FARM

0.66

Correlation Coefficient

ZCash  FARM

Poor diversification

The 3 months correlation between ZCash and FARM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ZCash and FARM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM and ZCash 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 ZCash are associated (or correlated) with FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM has no effect on the direction of ZCash i.e., ZCash and FARM go up and down completely randomly.

Pair Corralation between ZCash and FARM

Assuming the 90 days trading horizon ZCash is expected to generate 1.52 times more return on investment than FARM. However, ZCash is 1.52 times more volatile than FARM. It trades about 0.25 of its potential returns per unit of risk. FARM is currently generating about 0.12 per unit of risk. If you would invest  2,960  in ZCash on September 3, 2024 and sell it today you would earn a total of  4,546  from holding ZCash or generate 153.58% return on investment over 90 days.

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

ZCash  vs.  FARM

ZCash

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZCash are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ZCash exhibited solid returns over the last few months and may actually be approaching a breakup point.

FARM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FARM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, FARM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZCash and FARM

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

The idea behind ZCash and FARM 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.