Correlation Between Zip Co and Consumer Portfolio

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

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

Diversification Opportunities for Zip Co and Consumer Portfolio

-0.26

Correlation Coefficient

Zip Co  Consumer Portfolio

Very good diversification

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

Pair Corralation between Zip Co and Consumer Portfolio

Assuming the 90 days horizon Zip Co Limited is expected to under-perform the Consumer Portfolio. In addition to that, Zip Co is 2.16 times more volatile than Consumer Portfolio Services. It trades about -0.08 of its total potential returns per unit of risk. Consumer Portfolio Services is currently generating about -0.06 per unit of volatility. If you would invest  1,065  in Consumer Portfolio Services on December 2, 2024 and sell it today you would lose (65.00) from holding Consumer Portfolio Services or give up 6.1% of portfolio value over 90 days.

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

Zip Co Limited  vs.  Consumer Portfolio Services

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.

Consumer Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumer Portfolio Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Consumer Portfolio is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zip Co and Consumer Portfolio

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

The idea behind Zip Co Limited and Consumer Portfolio Services 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.