Correlation Between Exmar NV and Zimplats Holdings

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

By analyzing existing cross correlation between Exmar NV and Zimplats Holdings Limited, you can compare the effects of market volatilities on Exmar NV and Zimplats Holdings 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 Exmar NV with a short position of Zimplats Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exmar NV and Zimplats Holdings.

Diversification Opportunities for Exmar NV and Zimplats Holdings

0.19

Correlation Coefficient

Exmar NV  Zimplats Holdings

Average diversification

The 3 months correlation between Exmar and Zimplats is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Exmar NV and Zimplats Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimplats Holdings and Exmar NV 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 Exmar NV are associated (or correlated) with Zimplats Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimplats Holdings has no effect on the direction of Exmar NV i.e., Exmar NV and Zimplats Holdings go up and down completely randomly.

Pair Corralation between Exmar NV and Zimplats Holdings

Assuming the 90 days trading horizon Exmar NV is expected to generate 1.23 times more return on investment than Zimplats Holdings. However, Exmar NV is 1.23 times more volatile than Zimplats Holdings Limited. It trades about 0.12 of its potential returns per unit of risk. Zimplats Holdings Limited is currently generating about -0.03 per unit of risk. If you would invest  871.00  in Exmar NV on September 15, 2024 and sell it today you would earn a total of  267.00  from holding Exmar NV or generate 30.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Exmar NV  vs.  Zimplats Holdings Limited

Exmar NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exmar NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Exmar NV reported solid returns over the last few months and may actually be approaching a breakup point.

Zimplats Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimplats Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Zimplats Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Exmar NV and Zimplats Holdings

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

The idea behind Exmar NV and Zimplats Holdings Limited 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.