Correlation Between Zepp Health and TCL Electronics

Can any of the company-specific risk be diversified away by investing in both Zepp Health and TCL Electronics 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 Zepp Health and TCL Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zepp Health Corp and TCL Electronics Holdings, you can compare the effects of market volatilities on Zepp Health and TCL Electronics 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 Zepp Health with a short position of TCL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zepp Health and TCL Electronics.

Diversification Opportunities for Zepp Health and TCL Electronics

0.21

Correlation Coefficient

Zepp Health  TCL Electronics

Modest diversification

The 3 months correlation between Zepp and TCL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and TCL Electronics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Electronics Holdings and Zepp Health 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 Zepp Health Corp are associated (or correlated) with TCL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Electronics Holdings has no effect on the direction of Zepp Health i.e., Zepp Health and TCL Electronics go up and down completely randomly.

Pair Corralation between Zepp Health and TCL Electronics

Given the investment horizon of 90 days Zepp Health Corp is expected to generate 1.12 times more return on investment than TCL Electronics. However, Zepp Health is 1.12 times more volatile than TCL Electronics Holdings. It trades about 0.04 of its potential returns per unit of risk. TCL Electronics Holdings is currently generating about -0.01 per unit of risk. If you would invest  278.00  in Zepp Health Corp on September 5, 2024 and sell it today you would earn a total of  19.00  from holding Zepp Health Corp or generate 6.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Zepp Health Corp  vs.  TCL Electronics Holdings

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Zepp Health is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

TCL Electronics Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zepp Health and TCL Electronics

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

The idea behind Zepp Health Corp and TCL Electronics Holdings 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.