Correlation Between Zegona Communications and GoldMining

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

Diversification Opportunities for Zegona Communications and GoldMining

-0.2

Correlation Coefficient

Zegona Communications  GoldMining

Good diversification

The 3 months correlation between Zegona and GoldMining is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Zegona Communications i.e., Zegona Communications and GoldMining go up and down completely randomly.

Pair Corralation between Zegona Communications and GoldMining

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 0.9 times more return on investment than GoldMining. However, Zegona Communications Plc is 1.11 times less risky than GoldMining. It trades about 0.08 of its potential returns per unit of risk. GoldMining is currently generating about -0.01 per unit of risk. If you would invest  27,600  in Zegona Communications Plc on September 1, 2024 and sell it today you would earn a total of  7,200  from holding Zegona Communications Plc or generate 26.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	51.16%
Values	Daily Returns

Zegona Communications Plc  vs.  GoldMining

Zegona Communications Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zegona Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zegona Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

GoldMining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GoldMining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zegona Communications and GoldMining

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

The idea behind Zegona Communications Plc and GoldMining 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.