Correlation Between Wearable Devices and Zepp Health

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

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

Diversification Opportunities for Wearable Devices and Zepp Health

0.27

Correlation Coefficient

Wearable Devices  Zepp Health

Modest diversification

The 3 months correlation between Wearable and Zepp is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Wearable Devices 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 Wearable Devices 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 Wearable Devices 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 Wearable Devices i.e., Wearable Devices and Zepp Health go up and down completely randomly.

Pair Corralation between Wearable Devices and Zepp Health

Given the investment horizon of 90 days Wearable Devices is expected to under-perform the Zepp Health. In addition to that, Wearable Devices is 1.54 times more volatile than Zepp Health Corp. It trades about -0.08 of its total potential returns per unit of risk. Zepp Health Corp is currently generating about 0.03 per unit of volatility. If you would invest  301.00  in Zepp Health Corp on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Zepp Health Corp or generate 4.32% return on investment over 90 days.

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

Wearable Devices  vs.  Zepp Health Corp

Wearable Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wearable Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Zepp Health Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zepp Health Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Zepp Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wearable Devices and Zepp Health

The main advantage of trading using opposite Wearable Devices and Zepp Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wearable Devices 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 Wearable Devices 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.