Correlation Between Zegona Communications and Axway Software

Can any of the company-specific risk be diversified away by investing in both Zegona Communications and Axway Software 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 Axway Software 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 Axway Software SA, you can compare the effects of market volatilities on Zegona Communications and Axway Software 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 Axway Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and Axway Software.

Diversification Opportunities for Zegona Communications and Axway Software

-0.21

Correlation Coefficient

Zegona Communications  Axway Software

Very good diversification

The 3 months correlation between Zegona and Axway is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA 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 Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of Zegona Communications i.e., Zegona Communications and Axway Software go up and down completely randomly.

Pair Corralation between Zegona Communications and Axway Software

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 2.86 times more return on investment than Axway Software. However, Zegona Communications is 2.86 times more volatile than Axway Software SA. It trades about 0.08 of its potential returns per unit of risk. Axway Software SA is currently generating about 0.15 per unit of risk. If you would invest  35,600  in Zegona Communications Plc on October 11, 2024 and sell it today you would earn a total of  5,200  from holding Zegona Communications Plc or generate 14.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Zegona Communications Plc  vs.  Axway Software SA

Zegona Communications Plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 6 (%) 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.

Axway Software SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axway Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zegona Communications and Axway Software

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

The idea behind Zegona Communications Plc and Axway Software SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.