Correlation Between Zee Entertainment and AAA Technologies

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

By analyzing existing cross correlation between Zee Entertainment Enterprises and AAA Technologies Limited, you can compare the effects of market volatilities on Zee Entertainment and AAA Technologies 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 Zee Entertainment with a short position of AAA Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zee Entertainment and AAA Technologies.

Diversification Opportunities for Zee Entertainment and AAA Technologies

0.78

Correlation Coefficient

Zee Entertainment  AAA Technologies

Poor diversification

The 3 months correlation between Zee and AAA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zee Entertainment Enterprises and AAA Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAA Technologies and Zee Entertainment 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 Zee Entertainment Enterprises are associated (or correlated) with AAA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAA Technologies has no effect on the direction of Zee Entertainment i.e., Zee Entertainment and AAA Technologies go up and down completely randomly.

Pair Corralation between Zee Entertainment and AAA Technologies

Assuming the 90 days trading horizon Zee Entertainment Enterprises is expected to generate 0.89 times more return on investment than AAA Technologies. However, Zee Entertainment Enterprises is 1.12 times less risky than AAA Technologies. It trades about -0.11 of its potential returns per unit of risk. AAA Technologies Limited is currently generating about -0.16 per unit of risk. If you would invest  12,210  in Zee Entertainment Enterprises on December 30, 2024 and sell it today you would lose (2,376) from holding Zee Entertainment Enterprises or give up 19.46% of portfolio value over 90 days.

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

Zee Entertainment Enterprises  vs.  AAA Technologies Limited

Zee Entertainment

Risk-Adjusted Performance

Very Weak

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

AAA Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Zee Entertainment and AAA Technologies

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

The idea behind Zee Entertainment Enterprises and AAA Technologies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.