Correlation Between ZB FINANCIAL and CAFCA

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

By analyzing existing cross correlation between ZB FINANCIAL HOLDINGS and CAFCA LIMITED, you can compare the effects of market volatilities on ZB FINANCIAL and CAFCA 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 ZB FINANCIAL with a short position of CAFCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZB FINANCIAL and CAFCA.

Diversification Opportunities for ZB FINANCIAL and CAFCA

-0.75

Correlation Coefficient

ZB FINANCIAL  CAFCA

Pay attention - limited upside

The 3 months correlation between ZBFH and CAFCA is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding ZB FINANCIAL HOLDINGS and CAFCA LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAFCA LIMITED and ZB FINANCIAL 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 ZB FINANCIAL HOLDINGS are associated (or correlated) with CAFCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAFCA LIMITED has no effect on the direction of ZB FINANCIAL i.e., ZB FINANCIAL and CAFCA go up and down completely randomly.

Pair Corralation between ZB FINANCIAL and CAFCA

Assuming the 90 days trading horizon ZB FINANCIAL HOLDINGS is expected to under-perform the CAFCA. In addition to that, ZB FINANCIAL is 1.21 times more volatile than CAFCA LIMITED. It trades about -0.22 of its total potential returns per unit of risk. CAFCA LIMITED is currently generating about 0.23 per unit of volatility. If you would invest  140,000  in CAFCA LIMITED on October 12, 2024 and sell it today you would earn a total of  65,000  from holding CAFCA LIMITED or generate 46.43% return on investment over 90 days.

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

ZB FINANCIAL HOLDINGS  vs.  CAFCA LIMITED

ZB FINANCIAL HOLDINGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZB FINANCIAL HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CAFCA LIMITED

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAFCA LIMITED are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, CAFCA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZB FINANCIAL and CAFCA

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

The idea behind ZB FINANCIAL HOLDINGS and CAFCA LIMITED 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.