Correlation Between Zegona Communications and Cars

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

By analyzing existing cross correlation between Zegona Communications Plc and Cars Inc, you can compare the effects of market volatilities on Zegona Communications and Cars 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 Zegona Communications with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and Cars.

Diversification Opportunities for Zegona Communications and Cars

-0.76

Correlation Coefficient

Zegona Communications  Cars

Pay attention - limited upside

The 3 months correlation between Zegona and Cars is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Zegona Communications 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 Zegona Communications Plc are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Zegona Communications i.e., Zegona Communications and Cars go up and down completely randomly.

Pair Corralation between Zegona Communications and Cars

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 0.59 times more return on investment than Cars. However, Zegona Communications Plc is 1.69 times less risky than Cars. It trades about 0.3 of its potential returns per unit of risk. Cars Inc is currently generating about -0.16 per unit of risk. If you would invest  40,600  in Zegona Communications Plc on December 27, 2024 and sell it today you would earn a total of  26,900  from holding Zegona Communications Plc or generate 66.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	57.81%
Values	Daily Returns

Zegona Communications Plc  vs.  Cars Inc

Zegona Communications Plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Zegona Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Zegona Communications and Cars

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

The idea behind Zegona Communications Plc and Cars Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.