Correlation Between Zeo Energy and Brother Industries

Can any of the company-specific risk be diversified away by investing in both Zeo Energy and Brother Industries 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 Zeo Energy and Brother Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zeo Energy Corp and Brother Industries, you can compare the effects of market volatilities on Zeo Energy and Brother Industries 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 Zeo Energy with a short position of Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zeo Energy and Brother Industries.

Diversification Opportunities for Zeo Energy and Brother Industries

0.31

Correlation Coefficient

Zeo Energy  Brother Industries

Weak diversification

The 3 months correlation between Zeo and Brother is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Zeo Energy Corp and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries and Zeo Energy 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 Zeo Energy Corp are associated (or correlated) with Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of Zeo Energy i.e., Zeo Energy and Brother Industries go up and down completely randomly.

Pair Corralation between Zeo Energy and Brother Industries

Assuming the 90 days horizon Zeo Energy Corp is expected to generate 6.23 times more return on investment than Brother Industries. However, Zeo Energy is 6.23 times more volatile than Brother Industries. It trades about 0.23 of its potential returns per unit of risk. Brother Industries is currently generating about -0.03 per unit of risk. If you would invest  3.03  in Zeo Energy Corp on October 25, 2024 and sell it today you would earn a total of  6.96  from holding Zeo Energy Corp or generate 229.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	69.35%
Values	Daily Returns

Zeo Energy Corp  vs.  Brother Industries

Zeo Energy Corp

Risk-Adjusted Performance

18 of 100

Solid

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

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Brother Industries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zeo Energy and Brother Industries

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

The idea behind Zeo Energy Corp and Brother Industries 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.