Correlation Between ZF Commercial and Trent

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

Diversification Opportunities for ZF Commercial and Trent

0.24

Correlation Coefficient

ZF Commercial  Trent

Modest diversification

The 3 months correlation between ZFCVINDIA and Trent is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and Trent Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trent 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 Trent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trent Limited has no effect on the direction of ZF Commercial i.e., ZF Commercial and Trent go up and down completely randomly.

Pair Corralation between ZF Commercial and Trent

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to under-perform the Trent. In addition to that, ZF Commercial is 1.12 times more volatile than Trent Limited. It trades about -0.33 of its total potential returns per unit of risk. Trent Limited is currently generating about -0.15 per unit of volatility. If you would invest  665,280  in Trent Limited on October 26, 2024 and sell it today you would lose (91,920) from holding Trent Limited or give up 13.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

ZF Commercial Vehicle  vs.  Trent 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 unsteady 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.

Trent Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ZF Commercial and Trent

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

The idea behind ZF Commercial Vehicle and Trent 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.