Correlation Between THR and ZB
Can any of the company-specific risk be diversified away by investing in both THR and ZB 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 THR and ZB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THR and ZB, you can compare the effects of market volatilities on THR and ZB 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 THR with a short position of ZB. Check out your portfolio center. Please also check ongoing floating volatility patterns of THR and ZB.
Diversification Opportunities for THR and ZB
No risk reduction
The 3 months correlation between THR and ZB is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding THR and ZB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZB and THR 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 THR are associated (or correlated) with ZB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZB has no effect on the direction of THR i.e., THR and ZB go up and down completely randomly.
Pair Corralation between THR and ZB
If you would invest 44.00 in ZB on January 21, 2024 and sell it today you would earn a total of 0.00 from holding ZB or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
THR vs. ZB
Performance |
| Timeline |
| THR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ZB |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
THR and ZB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THR and ZB
The main advantage of trading using opposite THR and ZB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THR position performs unexpectedly, ZB 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 ZB will offset losses from the drop in ZB's long position.The idea behind THR and ZB 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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