Correlation Between ZF Commercial and Bharti Airtel

Can any of the company-specific risk be diversified away by investing in both ZF Commercial and Bharti Airtel 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 ZF Commercial and Bharti Airtel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZF Commercial Vehicle and Bharti Airtel Limited, you can compare the effects of market volatilities on ZF Commercial and Bharti Airtel 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 ZF Commercial with a short position of Bharti Airtel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZF Commercial and Bharti Airtel.

Diversification Opportunities for ZF Commercial and Bharti Airtel

0.01

Correlation Coefficient

ZF Commercial  Bharti Airtel

Significant diversification

The 3 months correlation between ZFCVINDIA and Bharti is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and Bharti Airtel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bharti Airtel Limited and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with Bharti Airtel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bharti Airtel Limited has no effect on the direction of ZF Commercial i.e., ZF Commercial and Bharti Airtel go up and down completely randomly.

Pair Corralation between ZF Commercial and Bharti Airtel

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to under-perform the Bharti Airtel. In addition to that, ZF Commercial is 1.71 times more volatile than Bharti Airtel Limited. It trades about -0.15 of its total potential returns per unit of risk. Bharti Airtel Limited is currently generating about -0.04 per unit of volatility. If you would invest  169,255  in Bharti Airtel Limited on October 21, 2024 and sell it today you would lose (6,505) from holding Bharti Airtel Limited or give up 3.84% of portfolio value over 90 days.

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

ZF Commercial Vehicle  vs.  Bharti Airtel Limited

ZF Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZF Commercial Vehicle 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 fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharti Airtel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bharti Airtel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ZF Commercial and Bharti Airtel

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

The idea behind ZF Commercial Vehicle and Bharti Airtel Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.