Correlation Between ZENITH BANK and INTERNATIONAL BREWERIES

Can any of the company-specific risk be diversified away by investing in both ZENITH BANK and INTERNATIONAL BREWERIES 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 ZENITH BANK and INTERNATIONAL BREWERIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZENITH BANK PLC and INTERNATIONAL BREWERIES PLC, you can compare the effects of market volatilities on ZENITH BANK and INTERNATIONAL BREWERIES 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 ZENITH BANK with a short position of INTERNATIONAL BREWERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZENITH BANK and INTERNATIONAL BREWERIES.

Diversification Opportunities for ZENITH BANK and INTERNATIONAL BREWERIES

0.4

Correlation Coefficient

ZENITH BANK  INTERNATIONAL BREWERIES

Very weak diversification

The 3 months correlation between ZENITH and INTERNATIONAL is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ZENITH BANK PLC and INTERNATIONAL BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL BREWERIES and ZENITH BANK 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 ZENITH BANK PLC are associated (or correlated) with INTERNATIONAL BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL BREWERIES has no effect on the direction of ZENITH BANK i.e., ZENITH BANK and INTERNATIONAL BREWERIES go up and down completely randomly.

Pair Corralation between ZENITH BANK and INTERNATIONAL BREWERIES

Assuming the 90 days trading horizon ZENITH BANK is expected to generate 1.57 times less return on investment than INTERNATIONAL BREWERIES. But when comparing it to its historical volatility, ZENITH BANK PLC is 1.72 times less risky than INTERNATIONAL BREWERIES. It trades about 0.26 of its potential returns per unit of risk. INTERNATIONAL BREWERIES PLC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  401.00  in INTERNATIONAL BREWERIES PLC on October 8, 2024 and sell it today you would earn a total of  159.00  from holding INTERNATIONAL BREWERIES PLC or generate 39.65% return on investment over 90 days.

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

ZENITH BANK PLC  vs.  INTERNATIONAL BREWERIES PLC

ZENITH BANK PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZENITH BANK PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, ZENITH BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL BREWERIES PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, INTERNATIONAL BREWERIES showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZENITH BANK and INTERNATIONAL BREWERIES

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

The idea behind ZENITH BANK PLC and INTERNATIONAL BREWERIES PLC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.