Correlation Between MP Materials and Zebra Technologies

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

By analyzing existing cross correlation between MP Materials Corp and Zebra Technologies, you can compare the effects of market volatilities on MP Materials and Zebra Technologies 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 MP Materials with a short position of Zebra Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of MP Materials and Zebra Technologies.

Diversification Opportunities for MP Materials and Zebra Technologies

0.75

Correlation Coefficient

MP Materials  Zebra Technologies

Poor diversification

The 3 months correlation between M2PM34 and Zebra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and Zebra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zebra Technologies and MP Materials 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 MP Materials Corp are associated (or correlated) with Zebra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zebra Technologies has no effect on the direction of MP Materials i.e., MP Materials and Zebra Technologies go up and down completely randomly.

Pair Corralation between MP Materials and Zebra Technologies

Assuming the 90 days trading horizon MP Materials is expected to generate 2.0 times less return on investment than Zebra Technologies. In addition to that, MP Materials is 1.58 times more volatile than Zebra Technologies. It trades about 0.04 of its total potential returns per unit of risk. Zebra Technologies is currently generating about 0.13 per unit of volatility. If you would invest  3,924  in Zebra Technologies on October 5, 2024 and sell it today you would earn a total of  4,004  from holding Zebra Technologies or generate 102.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

MP Materials Corp  vs.  Zebra Technologies

MP Materials Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MP Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zebra Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Zebra Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MP Materials and Zebra Technologies

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

The idea behind MP Materials Corp and Zebra Technologies 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 CEOs Directory module to screen CEOs from public companies around the world.