Correlation Between Masterwork Machinery and Ziel Home

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

By analyzing existing cross correlation between Masterwork Machinery and Ziel Home Furnishing, you can compare the effects of market volatilities on Masterwork Machinery and Ziel 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 Masterwork Machinery with a short position of Ziel Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masterwork Machinery and Ziel Home.

Diversification Opportunities for Masterwork Machinery and Ziel Home

0.78

Correlation Coefficient

Masterwork Machinery  Ziel Home

Poor diversification

The 3 months correlation between Masterwork and Ziel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Ziel Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziel Home Furnishing and Masterwork Machinery 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 Masterwork Machinery are associated (or correlated) with Ziel Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziel Home Furnishing has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Ziel Home go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Ziel Home

Assuming the 90 days trading horizon Masterwork Machinery is expected to under-perform the Ziel Home. In addition to that, Masterwork Machinery is 1.15 times more volatile than Ziel Home Furnishing. It trades about -0.23 of its total potential returns per unit of risk. Ziel Home Furnishing is currently generating about -0.23 per unit of volatility. If you would invest  2,153  in Ziel Home Furnishing on October 3, 2024 and sell it today you would lose (241.00) from holding Ziel Home Furnishing or give up 11.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Masterwork Machinery  vs.  Ziel Home Furnishing

Masterwork Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masterwork Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Masterwork Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ziel Home Furnishing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ziel Home Furnishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Masterwork Machinery and Ziel Home

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

The idea behind Masterwork Machinery and Ziel Home Furnishing 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.