Correlation Between ZF Commercial and Repco Home

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Can any of the company-specific risk be diversified away by investing in both ZF Commercial and Repco Home 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 ZF Commercial and Repco Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZF Commercial Vehicle and Repco Home Finance, you can compare the effects of market volatilities on ZF Commercial and Repco Home 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 ZF Commercial with a short position of Repco Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZF Commercial and Repco Home.

Diversification Opportunities for ZF Commercial and Repco Home

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between ZFCVINDIA and Repco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and Repco Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repco Home Finance and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with Repco Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repco Home Finance has no effect on the direction of ZF Commercial i.e., ZF Commercial and Repco Home go up and down completely randomly.

Pair Corralation between ZF Commercial and Repco Home

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to under-perform the Repco Home. In addition to that, ZF Commercial is 1.07 times more volatile than Repco Home Finance. It trades about -0.03 of its total potential returns per unit of risk. Repco Home Finance is currently generating about -0.02 per unit of volatility. If you would invest  46,646  in Repco Home Finance on October 14, 2024 and sell it today you would lose (6,406) from holding Repco Home Finance or give up 13.73% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ZF Commercial Vehicle  vs.  Repco Home Finance

 Performance 
       Timeline  
ZF Commercial Vehicle 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days ZF Commercial Vehicle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Repco Home Finance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ZF Commercial and Repco Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ZF Commercial and Repco Home

The main advantage of trading using opposite ZF Commercial and Repco Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZF Commercial position performs unexpectedly, Repco Home 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 Repco Home will offset losses from the drop in Repco Home's long position.
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The idea behind ZF Commercial Vehicle and Repco Home Finance 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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