Correlation Between Zegona Communications and Capital Drilling

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

Diversification Opportunities for Zegona Communications and Capital Drilling

-0.6

Correlation Coefficient

Zegona Communications  Capital Drilling

Excellent diversification

The 3 months correlation between Zegona and Capital is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Zegona Communications i.e., Zegona Communications and Capital Drilling go up and down completely randomly.

Pair Corralation between Zegona Communications and Capital Drilling

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.01 times more return on investment than Capital Drilling. However, Zegona Communications is 1.01 times more volatile than Capital Drilling. It trades about 0.31 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.05 per unit of risk. If you would invest  40,800  in Zegona Communications Plc on November 30, 2024 and sell it today you would earn a total of  15,700  from holding Zegona Communications Plc or generate 38.48% return on investment over 90 days.

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

Zegona Communications Plc  vs.  Capital Drilling

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 18 (%) 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.

Capital Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Zegona Communications and Capital Drilling

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

The idea behind Zegona Communications Plc and Capital Drilling 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.