Correlation Between Zegona Communications and Chocoladefabriken

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

Diversification Opportunities for Zegona Communications and Chocoladefabriken

0.82

Correlation Coefficient

Zegona Communications  Chocoladefabriken

Very poor diversification

The 3 months correlation between Zegona and Chocoladefabriken is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Chocoladefabriken Lindt Spruen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chocoladefabriken Lindt 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 Chocoladefabriken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chocoladefabriken Lindt has no effect on the direction of Zegona Communications i.e., Zegona Communications and Chocoladefabriken go up and down completely randomly.

Pair Corralation between Zegona Communications and Chocoladefabriken

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.93 times more return on investment than Chocoladefabriken. However, Zegona Communications is 1.93 times more volatile than Chocoladefabriken Lindt Spruengli. It trades about 0.3 of its potential returns per unit of risk. Chocoladefabriken Lindt Spruengli is currently generating about 0.16 per unit of risk. If you would invest  40,800  in Zegona Communications Plc on December 28, 2024 and sell it today you would earn a total of  26,700  from holding Zegona Communications Plc or generate 65.44% return on investment over 90 days.

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

Zegona Communications Plc  vs.  Chocoladefabriken Lindt Spruen

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 uncertain technical and fundamental indicators, Zegona Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chocoladefabriken Lindt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chocoladefabriken Lindt Spruengli are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chocoladefabriken unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zegona Communications and Chocoladefabriken

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

The idea behind Zegona Communications Plc and Chocoladefabriken Lindt Spruengli 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.