Correlation Between Level 3 and Zayo Group

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Can any of the company-specific risk be diversified away by investing in both Level 3 and Zayo Group 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 Level 3 and Zayo Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Level 3 Communications and Zayo Group Holdings, you can compare the effects of market volatilities on Level 3 and Zayo Group 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 Level 3 with a short position of Zayo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Level 3 and Zayo Group.

Diversification Opportunities for Level 3 and Zayo Group

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Level and Zayo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Level 3 Communications and Zayo Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zayo Group Holdings and Level 3 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 Level 3 Communications are associated (or correlated) with Zayo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zayo Group Holdings has no effect on the direction of Level 3 i.e., Level 3 and Zayo Group go up and down completely randomly.

Pair Corralation between Level 3 and Zayo Group

If you would invest (100.00) in Zayo Group Holdings on December 29, 2023 and sell it today you would earn a total of  100.00  from holding Zayo Group Holdings or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Level 3 Communications  vs.  Zayo Group Holdings

 Performance 
       Timeline  
Level 3 Communications 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Level 3 Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Level 3 is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Zayo Group Holdings 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Zayo Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Zayo Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Level 3 and Zayo Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Level 3 and Zayo Group

The main advantage of trading using opposite Level 3 and Zayo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Level 3 position performs unexpectedly, Zayo Group 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 Zayo Group will offset losses from the drop in Zayo Group's long position.
The idea behind Level 3 Communications and Zayo Group 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.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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