Correlation Between Trent and ZF Commercial

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

By analyzing existing cross correlation between Trent Limited and ZF Commercial Vehicle, you can compare the effects of market volatilities on Trent and ZF Commercial 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 Trent with a short position of ZF Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trent and ZF Commercial.

Diversification Opportunities for Trent and ZF Commercial

0.38

Correlation Coefficient

Trent  ZF Commercial

Weak diversification

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

Pair Corralation between Trent and ZF Commercial

Assuming the 90 days trading horizon Trent Limited is expected to under-perform the ZF Commercial. In addition to that, Trent is 1.07 times more volatile than ZF Commercial Vehicle. It trades about -0.16 of its total potential returns per unit of risk. ZF Commercial Vehicle is currently generating about 0.03 per unit of volatility. If you would invest  1,172,735  in ZF Commercial Vehicle on December 26, 2024 and sell it today you would earn a total of  26,985  from holding ZF Commercial Vehicle or generate 2.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Trent Limited  vs.  ZF Commercial Vehicle

Trent Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ZF Commercial Vehicle

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ZF Commercial Vehicle are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ZF Commercial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Trent and ZF Commercial

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

The idea behind Trent Limited and ZF Commercial Vehicle 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.