Correlation Between Top Glove and Carl Zeiss

Can any of the company-specific risk be diversified away by investing in both Top Glove and Carl Zeiss 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 Top Glove and Carl Zeiss into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Top Glove and Carl Zeiss Meditec, you can compare the effects of market volatilities on Top Glove and Carl Zeiss 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 Top Glove with a short position of Carl Zeiss. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Glove and Carl Zeiss.

Diversification Opportunities for Top Glove and Carl Zeiss

-0.68

Correlation Coefficient

Top Glove  Carl Zeiss

Excellent diversification

The 3 months correlation between Top and Carl is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Top Glove and Carl Zeiss Meditec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carl Zeiss Meditec and Top Glove 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 Top Glove are associated (or correlated) with Carl Zeiss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carl Zeiss Meditec has no effect on the direction of Top Glove i.e., Top Glove and Carl Zeiss go up and down completely randomly.

Pair Corralation between Top Glove and Carl Zeiss

Assuming the 90 days horizon Top Glove is expected to generate 3.53 times more return on investment than Carl Zeiss. However, Top Glove is 3.53 times more volatile than Carl Zeiss Meditec. It trades about 0.06 of its potential returns per unit of risk. Carl Zeiss Meditec is currently generating about -0.05 per unit of risk. If you would invest  18.00  in Top Glove on September 26, 2024 and sell it today you would earn a total of  13.00  from holding Top Glove or generate 72.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Top Glove  vs.  Carl Zeiss Meditec

Top Glove

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Top Glove are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Top Glove reported solid returns over the last few months and may actually be approaching a breakup point.

Carl Zeiss Meditec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carl Zeiss Meditec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Top Glove and Carl Zeiss

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

The idea behind Top Glove and Carl Zeiss Meditec 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.