Correlation Between ZKB Palladium and Invesco CoinShares

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

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

Diversification Opportunities for ZKB Palladium and Invesco CoinShares

-0.28

Correlation Coefficient

ZKB Palladium  Invesco CoinShares

Very good diversification

The 3 months correlation between ZKB and Invesco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ZKB Palladium ETF and Invesco CoinShares Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CoinShares Global and ZKB Palladium 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 ZKB Palladium ETF are associated (or correlated) with Invesco CoinShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CoinShares Global has no effect on the direction of ZKB Palladium i.e., ZKB Palladium and Invesco CoinShares go up and down completely randomly.

Pair Corralation between ZKB Palladium and Invesco CoinShares

Assuming the 90 days trading horizon ZKB Palladium ETF is expected to generate 0.74 times more return on investment than Invesco CoinShares. However, ZKB Palladium ETF is 1.35 times less risky than Invesco CoinShares. It trades about -0.18 of its potential returns per unit of risk. Invesco CoinShares Global is currently generating about -0.14 per unit of risk. If you would invest  25,915  in ZKB Palladium ETF on September 29, 2024 and sell it today you would lose (1,615) from holding ZKB Palladium ETF or give up 6.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

ZKB Palladium ETF  vs.  Invesco CoinShares Global

ZKB Palladium ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZKB Palladium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ZKB Palladium is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco CoinShares Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CoinShares Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco CoinShares showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZKB Palladium and Invesco CoinShares

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

The idea behind ZKB Palladium ETF and Invesco CoinShares Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.