Correlation Between Forza X1 and EZGO Technologies

Can any of the company-specific risk be diversified away by investing in both Forza X1 and EZGO Technologies 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 Forza X1 and EZGO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Forza X1 and EZGO Technologies, you can compare the effects of market volatilities on Forza X1 and EZGO Technologies 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 Forza X1 with a short position of EZGO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forza X1 and EZGO Technologies.

Diversification Opportunities for Forza X1 and EZGO Technologies

0.14

Correlation Coefficient

Forza X1  EZGO Technologies

Average diversification

The 3 months correlation between Forza and EZGO is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Forza X1 and EZGO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZGO Technologies and Forza X1 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 Forza X1 are associated (or correlated) with EZGO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZGO Technologies has no effect on the direction of Forza X1 i.e., Forza X1 and EZGO Technologies go up and down completely randomly.

Pair Corralation between Forza X1 and EZGO Technologies

Given the investment horizon of 90 days Forza X1 is expected to under-perform the EZGO Technologies. In addition to that, Forza X1 is 1.02 times more volatile than EZGO Technologies. It trades about -0.01 of its total potential returns per unit of risk. EZGO Technologies is currently generating about -0.01 per unit of volatility. If you would invest  1,588  in EZGO Technologies on August 23, 2024 and sell it today you would lose (1,492) from holding EZGO Technologies or give up 93.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.56%
Values	Daily Returns

Forza X1  vs.  EZGO Technologies

Forza X1

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Forza X1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating basic indicators, Forza X1 sustained solid returns over the last few months and may actually be approaching a breakup point.

EZGO Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EZGO Technologies 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Forza X1 and EZGO Technologies

The main advantage of trading using opposite Forza X1 and EZGO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forza X1 position performs unexpectedly, EZGO Technologies 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 EZGO Technologies will offset losses from the drop in EZGO Technologies' long position.

The idea behind Forza X1 and EZGO Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.