Correlation Between Southern Petrochemicals and Zota Health

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

By analyzing existing cross correlation between Southern Petrochemicals Industries and Zota Health Care, you can compare the effects of market volatilities on Southern Petrochemicals and Zota Health 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 Southern Petrochemicals with a short position of Zota Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Petrochemicals and Zota Health.

Diversification Opportunities for Southern Petrochemicals and Zota Health

-0.38

Correlation Coefficient

Southern Petrochemicals  Zota Health

Very good diversification

The 3 months correlation between Southern and Zota is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southern Petrochemicals Indust and Zota Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zota Health Care and Southern Petrochemicals 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 Southern Petrochemicals Industries are associated (or correlated) with Zota Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zota Health Care has no effect on the direction of Southern Petrochemicals i.e., Southern Petrochemicals and Zota Health go up and down completely randomly.

Pair Corralation between Southern Petrochemicals and Zota Health

Assuming the 90 days trading horizon Southern Petrochemicals is expected to generate 8.24 times less return on investment than Zota Health. But when comparing it to its historical volatility, Southern Petrochemicals Industries is 1.58 times less risky than Zota Health. It trades about 0.05 of its potential returns per unit of risk. Zota Health Care is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  58,425  in Zota Health Care on October 25, 2024 and sell it today you would earn a total of  38,230  from holding Zota Health Care or generate 65.43% return on investment over 90 days.

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

Southern Petrochemicals Indust  vs.  Zota Health Care

Southern Petrochemicals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Petrochemicals Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Southern Petrochemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zota Health Care

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zota Health Care are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Zota Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Petrochemicals and Zota Health

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

The idea behind Southern Petrochemicals Industries and Zota Health Care 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.