Correlation Between CleanTech Lithium and Zegona Communications
Can any of the company-specific risk be diversified away by investing in both CleanTech Lithium and Zegona Communications 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 CleanTech Lithium and Zegona Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CleanTech Lithium plc and Zegona Communications Plc, you can compare the effects of market volatilities on CleanTech Lithium and Zegona Communications 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 CleanTech Lithium with a short position of Zegona Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and Zegona Communications.
Diversification Opportunities for CleanTech Lithium and Zegona Communications
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CleanTech and Zegona is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications Plc and CleanTech Lithium 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 CleanTech Lithium plc are associated (or correlated) with Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of CleanTech Lithium i.e., CleanTech Lithium and Zegona Communications go up and down completely randomly.
Pair Corralation between CleanTech Lithium and Zegona Communications
Assuming the 90 days trading horizon CleanTech Lithium plc is expected to under-perform the Zegona Communications. But the stock apears to be less risky and, when comparing its historical volatility, CleanTech Lithium plc is 3.14 times less risky than Zegona Communications. The stock trades about -0.03 of its potential returns per unit of risk. The Zegona Communications Plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,950 in Zegona Communications Plc on September 3, 2024 and sell it today you would earn a total of 26,850 from holding Zegona Communications Plc or generate 337.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.77% |
| Values | Daily Returns |
CleanTech Lithium plc vs. Zegona Communications Plc
Performance |
| Timeline |
| CleanTech Lithium plc |
| Zegona Communications Plc |
CleanTech Lithium and Zegona Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CleanTech Lithium and Zegona Communications
The main advantage of trading using opposite CleanTech Lithium and Zegona Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CleanTech Lithium position performs unexpectedly, Zegona Communications 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 Zegona Communications will offset losses from the drop in Zegona Communications' long position.The idea behind CleanTech Lithium plc and Zegona Communications Plc 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.| Zegona Communications vs. CleanTech Lithium plc | Zegona Communications vs. Diversified Energy | Zegona Communications vs. Bankers Investment Trust | Zegona Communications vs. Mindflair Plc |
Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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