Correlation Between Carl Zeiss and Top Glove

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

By analyzing existing cross correlation between Carl Zeiss Meditec and Top Glove, you can compare the effects of market volatilities on Carl Zeiss and Top Glove 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 Carl Zeiss with a short position of Top Glove. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carl Zeiss and Top Glove.

Diversification Opportunities for Carl Zeiss and Top Glove

-0.77

Correlation Coefficient

Carl Zeiss  Top Glove

Pay attention - limited upside

The 3 months correlation between Carl and Top is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Carl Zeiss Meditec and Top Glove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Glove and Carl Zeiss 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 Carl Zeiss Meditec are associated (or correlated) with Top Glove. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Glove has no effect on the direction of Carl Zeiss i.e., Carl Zeiss and Top Glove go up and down completely randomly.

Pair Corralation between Carl Zeiss and Top Glove

Assuming the 90 days horizon Carl Zeiss Meditec is expected to under-perform the Top Glove. But the pink sheet apears to be less risky and, when comparing its historical volatility, Carl Zeiss Meditec is 4.2 times less risky than Top Glove. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Top Glove is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Top Glove on September 26, 2024 and sell it today you would earn a total of  13.00  from holding Top Glove or generate 72.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Carl Zeiss Meditec  vs.  Top Glove

Carl Zeiss Meditec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carl Zeiss Meditec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Top Glove

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Top Glove are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Top Glove reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carl Zeiss and Top Glove

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

The idea behind Carl Zeiss Meditec and Top Glove 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.