Correlation Between INTERNATIONAL BREWERIES and ZENITH BANK

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

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

Diversification Opportunities for INTERNATIONAL BREWERIES and ZENITH BANK

0.4

Correlation Coefficient

INTERNATIONAL BREWERIES  ZENITH BANK

Very weak diversification

The 3 months correlation between INTERNATIONAL and ZENITH is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL BREWERIES PLC 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 INTERNATIONAL 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 INTERNATIONAL BREWERIES PLC 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 INTERNATIONAL BREWERIES i.e., INTERNATIONAL BREWERIES and ZENITH BANK go up and down completely randomly.

Pair Corralation between INTERNATIONAL BREWERIES and ZENITH BANK

Assuming the 90 days trading horizon INTERNATIONAL BREWERIES PLC is expected to generate 3.98 times more return on investment than ZENITH BANK. However, INTERNATIONAL BREWERIES is 3.98 times more volatile than ZENITH BANK PLC. It trades about 0.53 of its potential returns per unit of risk. ZENITH BANK PLC is currently generating about 0.34 per unit of risk. If you would invest  400.00  in INTERNATIONAL BREWERIES PLC on October 6, 2024 and sell it today you would earn a total of  160.00  from holding INTERNATIONAL BREWERIES PLC or generate 40.0% return on investment over 90 days.

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

INTERNATIONAL BREWERIES PLC  vs.  ZENITH BANK PLC

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL BREWERIES PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, INTERNATIONAL BREWERIES showed solid returns over the last few months and may actually be approaching a breakup point.

ZENITH BANK PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZENITH BANK PLC are ranked lower than 19 (%) 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 INTERNATIONAL BREWERIES and ZENITH BANK

The main advantage of trading using opposite INTERNATIONAL BREWERIES and ZENITH BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERNATIONAL BREWERIES 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 INTERNATIONAL BREWERIES PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.