Correlation Between Zscaler and AvidXchange Holdings

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

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

Diversification Opportunities for Zscaler and AvidXchange Holdings

-0.16

Correlation Coefficient

Zscaler  AvidXchange Holdings

Good diversification

The 3 months correlation between Zscaler and AvidXchange is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Zscaler and AvidXchange Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvidXchange Holdings and Zscaler 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 Zscaler are associated (or correlated) with AvidXchange Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvidXchange Holdings has no effect on the direction of Zscaler i.e., Zscaler and AvidXchange Holdings go up and down completely randomly.

Pair Corralation between Zscaler and AvidXchange Holdings

Allowing for the 90-day total investment horizon Zscaler is expected to under-perform the AvidXchange Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Zscaler is 1.2 times less risky than AvidXchange Holdings. The stock trades about -0.22 of its potential returns per unit of risk. The AvidXchange Holdings is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,248  in AvidXchange Holdings on January 30, 2024 and sell it today you would lose (52.00) from holding AvidXchange Holdings or give up 4.17% of portfolio value over 90 days.

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

Zscaler  vs.  AvidXchange Holdings

Zscaler

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zscaler has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AvidXchange Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AvidXchange Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, AvidXchange Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Zscaler and AvidXchange Holdings

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

The idea behind Zscaler and AvidXchange 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.