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

-0.51

Correlation Coefficient

Wearable Devices  Zepp Health

Excellent diversification

The 3 months correlation between Wearable and Zepp is -0.51. 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

Assuming the 90 days horizon Wearable Devices is expected to generate 3.46 times more return on investment than Zepp Health. However, Wearable Devices is 3.46 times more volatile than Zepp Health Corp. It trades about 0.22 of its potential returns per unit of risk. Zepp Health Corp is currently generating about 0.0 per unit of risk. If you would invest  14.00  in Wearable Devices on October 17, 2024 and sell it today you would earn a total of  20.00  from holding Wearable Devices or generate 142.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.47%
Values	Daily Returns

Wearable Devices  vs.  Zepp Health Corp

Wearable Devices

Risk-Adjusted Performance

11 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wearable Devices are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Wearable Devices showed solid returns over the last few months and may actually be approaching a breakup point.

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.