Correlation Between ZK International and Constellium

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

By analyzing existing cross correlation between ZK International Group and Constellium Nv, you can compare the effects of market volatilities on ZK International and Constellium 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 ZK International with a short position of Constellium. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZK International and Constellium.

Diversification Opportunities for ZK International and Constellium

-0.57

Correlation Coefficient

ZK International  Constellium

Excellent diversification

The 3 months correlation between ZKIN and Constellium is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding ZK International Group and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv and ZK International 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 ZK International Group are associated (or correlated) with Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of ZK International i.e., ZK International and Constellium go up and down completely randomly.

Pair Corralation between ZK International and Constellium

Given the investment horizon of 90 days ZK International Group is expected to generate 1.75 times more return on investment than Constellium. However, ZK International is 1.75 times more volatile than Constellium Nv. It trades about -0.02 of its potential returns per unit of risk. Constellium Nv is currently generating about -0.13 per unit of risk. If you would invest  73.00  in ZK International Group on August 18, 2024 and sell it today you would lose (21.00) from holding ZK International Group or give up 28.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ZK International Group  vs.  Constellium Nv

ZK International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZK International Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, ZK International displayed solid returns over the last few months and may actually be approaching a breakup point.

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv 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 basic 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 ZK International and Constellium

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

The idea behind ZK International Group and Constellium Nv 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.