Correlation Between Zscaler and Palantir TechnologiesInc

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

By analyzing existing cross correlation between Zscaler and Palantir TechnologiesInc, you can compare the effects of market volatilities on Zscaler and Palantir TechnologiesInc 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 Palantir TechnologiesInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zscaler and Palantir TechnologiesInc.

Diversification Opportunities for Zscaler and Palantir TechnologiesInc

-0.14

Correlation Coefficient

Zscaler  Palantir TechnologiesInc

Good diversification

The 3 months correlation between Zscaler and Palantir is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Zscaler and Palantir TechnologiesInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir TechnologiesInc 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 Palantir TechnologiesInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir TechnologiesInc has no effect on the direction of Zscaler i.e., Zscaler and Palantir TechnologiesInc go up and down completely randomly.

Pair Corralation between Zscaler and Palantir TechnologiesInc

Allowing for the 90-day total investment horizon Zscaler is expected to under-perform the Palantir TechnologiesInc. But the stock apears to be less risky and, when comparing its historical volatility, Zscaler is 1.1 times less risky than Palantir TechnologiesInc. The stock trades about -0.18 of its potential returns per unit of risk. The Palantir TechnologiesInc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,286  in Palantir TechnologiesInc on January 31, 2024 and sell it today you would lose (3.00) from holding Palantir TechnologiesInc or give up 0.13% of portfolio value over 90 days.

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

Zscaler  vs.  Palantir TechnologiesInc

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 weak 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.

Palantir TechnologiesInc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir TechnologiesInc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Palantir TechnologiesInc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zscaler and Palantir TechnologiesInc

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

The idea behind Zscaler and Palantir TechnologiesInc 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 Transaction History module to view history of all your transactions and understand their impact on performance.