Correlation Between CAFCA and ZB FINANCIAL

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

By analyzing existing cross correlation between CAFCA LIMITED and ZB FINANCIAL HOLDINGS, you can compare the effects of market volatilities on CAFCA and ZB FINANCIAL 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 CAFCA with a short position of ZB FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAFCA and ZB FINANCIAL.

Diversification Opportunities for CAFCA and ZB FINANCIAL

-0.08

Correlation Coefficient

CAFCA  ZB FINANCIAL

Good diversification

The 3 months correlation between CAFCA and ZBFH is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CAFCA LIMITED and ZB FINANCIAL HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZB FINANCIAL HOLDINGS and CAFCA 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 CAFCA LIMITED are associated (or correlated) with ZB FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZB FINANCIAL HOLDINGS has no effect on the direction of CAFCA i.e., CAFCA and ZB FINANCIAL go up and down completely randomly.

Pair Corralation between CAFCA and ZB FINANCIAL

Assuming the 90 days trading horizon CAFCA LIMITED is expected to generate 0.49 times more return on investment than ZB FINANCIAL. However, CAFCA LIMITED is 2.05 times less risky than ZB FINANCIAL. It trades about 0.06 of its potential returns per unit of risk. ZB FINANCIAL HOLDINGS is currently generating about -0.1 per unit of risk. If you would invest  205,000  in CAFCA LIMITED on December 25, 2024 and sell it today you would earn a total of  15,005  from holding CAFCA LIMITED or generate 7.32% return on investment over 90 days.

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

CAFCA LIMITED  vs.  ZB FINANCIAL HOLDINGS

CAFCA LIMITED

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CAFCA LIMITED are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, CAFCA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ZB FINANCIAL HOLDINGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZB FINANCIAL HOLDINGS 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 fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CAFCA and ZB FINANCIAL

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

The idea behind CAFCA LIMITED and ZB FINANCIAL 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.