Correlation Between GM Breweries and Zota Health

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

By analyzing existing cross correlation between GM Breweries Limited and Zota Health Care, you can compare the effects of market volatilities on GM Breweries and Zota Health 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 GM Breweries with a short position of Zota Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and Zota Health.

Diversification Opportunities for GM Breweries and Zota Health

0.11

Correlation Coefficient

GM Breweries  Zota Health

Average diversification

The 3 months correlation between GMBREW and Zota is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Zota Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zota Health Care and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Zota Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zota Health Care has no effect on the direction of GM Breweries i.e., GM Breweries and Zota Health go up and down completely randomly.

Pair Corralation between GM Breweries and Zota Health

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the Zota Health. But the stock apears to be less risky and, when comparing its historical volatility, GM Breweries Limited is 1.27 times less risky than Zota Health. The stock trades about -0.13 of its potential returns per unit of risk. The Zota Health Care is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  82,615  in Zota Health Care on December 23, 2024 and sell it today you would lose (1,550) from holding Zota Health Care or give up 1.88% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  Zota Health Care

GM Breweries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat 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.

Zota Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zota Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Zota Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM Breweries and Zota Health

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

The idea behind GM Breweries Limited and Zota Health Care 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.