Correlation Between INDUSTRIAL MEDICAL and ZENITH BANK

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

By analyzing existing cross correlation between INDUSTRIAL MEDICAL GASES and ZENITH BANK PLC, you can compare the effects of market volatilities on INDUSTRIAL MEDICAL and ZENITH BANK 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 INDUSTRIAL MEDICAL with a short position of ZENITH BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDUSTRIAL MEDICAL and ZENITH BANK.

Diversification Opportunities for INDUSTRIAL MEDICAL and ZENITH BANK

0.86

Correlation Coefficient

INDUSTRIAL MEDICAL  ZENITH BANK

Very poor diversification

The 3 months correlation between INDUSTRIAL and ZENITH is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding INDUSTRIAL MEDICAL GASES and ZENITH BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZENITH BANK PLC and INDUSTRIAL MEDICAL 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 INDUSTRIAL MEDICAL GASES are associated (or correlated) with ZENITH BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZENITH BANK PLC has no effect on the direction of INDUSTRIAL MEDICAL i.e., INDUSTRIAL MEDICAL and ZENITH BANK go up and down completely randomly.

Pair Corralation between INDUSTRIAL MEDICAL and ZENITH BANK

Assuming the 90 days trading horizon INDUSTRIAL MEDICAL GASES is expected to generate 0.95 times more return on investment than ZENITH BANK. However, INDUSTRIAL MEDICAL GASES is 1.05 times less risky than ZENITH BANK. It trades about 0.16 of its potential returns per unit of risk. ZENITH BANK PLC is currently generating about 0.06 per unit of risk. If you would invest  680.00  in INDUSTRIAL MEDICAL GASES on October 11, 2024 and sell it today you would earn a total of  3,115  from holding INDUSTRIAL MEDICAL GASES or generate 458.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.74%
Values	Daily Returns

INDUSTRIAL MEDICAL GASES  vs.  ZENITH BANK PLC

INDUSTRIAL MEDICAL GASES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INDUSTRIAL MEDICAL GASES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, INDUSTRIAL MEDICAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ZENITH BANK PLC

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZENITH BANK PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, ZENITH BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDUSTRIAL MEDICAL and ZENITH BANK

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

The idea behind INDUSTRIAL MEDICAL GASES and ZENITH BANK PLC 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.