Correlation Between Rockwood Realisation and Zegona Communications

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

By analyzing existing cross correlation between Rockwood Realisation PLC and Zegona Communications Plc, you can compare the effects of market volatilities on Rockwood Realisation and Zegona Communications 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 Rockwood Realisation with a short position of Zegona Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockwood Realisation and Zegona Communications.

Diversification Opportunities for Rockwood Realisation and Zegona Communications

-0.27

Correlation Coefficient

Rockwood Realisation  Zegona Communications

Very good diversification

The 3 months correlation between Rockwood and Zegona is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Rockwood Realisation PLC and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications Plc and Rockwood Realisation 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 Rockwood Realisation PLC are associated (or correlated) with Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of Rockwood Realisation i.e., Rockwood Realisation and Zegona Communications go up and down completely randomly.

Pair Corralation between Rockwood Realisation and Zegona Communications

Assuming the 90 days trading horizon Rockwood Realisation is expected to generate 10.12 times less return on investment than Zegona Communications. But when comparing it to its historical volatility, Rockwood Realisation PLC is 18.94 times less risky than Zegona Communications. It trades about 0.09 of its potential returns per unit of risk. Zegona Communications Plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,750  in Zegona Communications Plc on September 26, 2024 and sell it today you would earn a total of  32,850  from holding Zegona Communications Plc or generate 423.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.8%
Values	Daily Returns

Rockwood Realisation PLC  vs.  Zegona Communications Plc

Rockwood Realisation PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwood Realisation PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rockwood Realisation is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Zegona Communications Plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Zegona Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rockwood Realisation and Zegona Communications

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

The idea behind Rockwood Realisation PLC and Zegona Communications 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.