Correlation Between TCL Electronics and Zepp Health

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

By analyzing existing cross correlation between TCL Electronics Holdings and Zepp Health Corp, you can compare the effects of market volatilities on TCL Electronics and Zepp 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 TCL Electronics with a short position of Zepp Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of TCL Electronics and Zepp Health.

Diversification Opportunities for TCL Electronics and Zepp Health

0.22

Correlation Coefficient

TCL Electronics  Zepp Health

Modest diversification

The 3 months correlation between TCL and Zepp is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TCL Electronics Holdings and Zepp Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zepp Health Corp and TCL Electronics 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 TCL Electronics Holdings are associated (or correlated) with Zepp Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zepp Health Corp has no effect on the direction of TCL Electronics i.e., TCL Electronics and Zepp Health go up and down completely randomly.

Pair Corralation between TCL Electronics and Zepp Health

Assuming the 90 days horizon TCL Electronics Holdings is expected to generate 0.76 times more return on investment than Zepp Health. However, TCL Electronics Holdings is 1.32 times less risky than Zepp Health. It trades about 0.21 of its potential returns per unit of risk. Zepp Health Corp is currently generating about 0.09 per unit of risk. If you would invest  79.00  in TCL Electronics Holdings on December 24, 2024 and sell it today you would earn a total of  25.00  from holding TCL Electronics Holdings or generate 31.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.33%
Values	Daily Returns

TCL Electronics Holdings  vs.  Zepp Health Corp

TCL Electronics Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Zepp Health Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zepp Health Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Zepp Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TCL Electronics and Zepp Health

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

The idea behind TCL Electronics Holdings and Zepp Health Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.