Correlation Between ZB FINANCIAL and STAR AFRICA

Can any of the company-specific risk be diversified away by investing in both ZB FINANCIAL and STAR AFRICA 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 STAR AFRICA 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 STAR AFRICA PORATION, you can compare the effects of market volatilities on ZB FINANCIAL and STAR AFRICA 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 STAR AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZB FINANCIAL and STAR AFRICA.

Diversification Opportunities for ZB FINANCIAL and STAR AFRICA

0.01

Correlation Coefficient

ZB FINANCIAL  STAR AFRICA

Significant diversification

The 3 months correlation between ZBFH and STAR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ZB FINANCIAL HOLDINGS and STAR AFRICA PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAR AFRICA PORATION 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 STAR AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAR AFRICA PORATION has no effect on the direction of ZB FINANCIAL i.e., ZB FINANCIAL and STAR AFRICA go up and down completely randomly.

Pair Corralation between ZB FINANCIAL and STAR AFRICA

Assuming the 90 days trading horizon ZB FINANCIAL HOLDINGS is expected to under-perform the STAR AFRICA. But the stock apears to be less risky and, when comparing its historical volatility, ZB FINANCIAL HOLDINGS is 1.97 times less risky than STAR AFRICA. The stock trades about -0.32 of its potential returns per unit of risk. The STAR AFRICA PORATION is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  220.00  in STAR AFRICA PORATION on October 27, 2024 and sell it today you would earn a total of  21.00  from holding STAR AFRICA PORATION or generate 9.55% return on investment over 90 days.

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

ZB FINANCIAL HOLDINGS  vs.  STAR AFRICA PORATION

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.

STAR AFRICA PORATION

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STAR AFRICA PORATION are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, STAR AFRICA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZB FINANCIAL and STAR AFRICA

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

The idea behind ZB FINANCIAL HOLDINGS and STAR AFRICA PORATION 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.