Correlation Between Essentra Plc and Zeon

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

By analyzing existing cross correlation between Essentra plc and Zeon Corporation, you can compare the effects of market volatilities on Essentra Plc and Zeon 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 Essentra Plc with a short position of Zeon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essentra Plc and Zeon.

Diversification Opportunities for Essentra Plc and Zeon

-0.47

Correlation Coefficient

Essentra Plc  Zeon

Very good diversification

The 3 months correlation between Essentra and Zeon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Essentra plc and Zeon Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeon and Essentra Plc 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 Essentra plc are associated (or correlated) with Zeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeon has no effect on the direction of Essentra Plc i.e., Essentra Plc and Zeon go up and down completely randomly.

Pair Corralation between Essentra Plc and Zeon

Assuming the 90 days horizon Essentra plc is expected to under-perform the Zeon. In addition to that, Essentra Plc is 1.28 times more volatile than Zeon Corporation. It trades about -0.13 of its total potential returns per unit of risk. Zeon Corporation is currently generating about 0.08 per unit of volatility. If you would invest  885.00  in Zeon Corporation on December 26, 2024 and sell it today you would earn a total of  70.00  from holding Zeon Corporation or generate 7.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Essentra plc  vs.  Zeon Corp.

Essentra plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Essentra plc 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 nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zeon

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zeon Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zeon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Essentra Plc and Zeon

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

The idea behind Essentra plc and Zeon Corporation 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.