Correlation Between Zegona Communications and Foresight Environmental

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

Diversification Opportunities for Zegona Communications and Foresight Environmental

-0.17

Correlation Coefficient

Zegona Communications  Foresight Environmental

Good diversification

The 3 months correlation between Zegona and Foresight is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Foresight Environmental Infras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foresight Environmental 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 Foresight Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foresight Environmental has no effect on the direction of Zegona Communications i.e., Zegona Communications and Foresight Environmental go up and down completely randomly.

Pair Corralation between Zegona Communications and Foresight Environmental

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 2.79 times more return on investment than Foresight Environmental. However, Zegona Communications is 2.79 times more volatile than Foresight Environmental Infrastructure. It trades about 0.26 of its potential returns per unit of risk. Foresight Environmental Infrastructure is currently generating about -0.2 per unit of risk. If you would invest  33,000  in Zegona Communications Plc on October 11, 2024 and sell it today you would earn a total of  8,600  from holding Zegona Communications Plc or generate 26.06% return on investment over 90 days.

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

Zegona Communications Plc  vs.  Foresight Environmental Infras

Zegona Communications Plc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 7 (%) 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.

Foresight Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foresight Environmental Infrastructure 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 February 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 Foresight Environmental

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

The idea behind Zegona Communications Plc and Foresight Environmental Infrastructure 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.