Correlation Between Zinc Media and Aeorema Communications

Can any of the company-specific risk be diversified away by investing in both Zinc Media and Aeorema Communications 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 Zinc Media and Aeorema Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zinc Media Group and Aeorema Communications Plc, you can compare the effects of market volatilities on Zinc Media and Aeorema Communications 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 Zinc Media with a short position of Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zinc Media and Aeorema Communications.

Diversification Opportunities for Zinc Media and Aeorema Communications

-0.7

Correlation Coefficient

Zinc Media  Aeorema Communications

Excellent diversification

The 3 months correlation between Zinc and Aeorema is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zinc Media Group and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and Zinc Media 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 Zinc Media Group are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Zinc Media i.e., Zinc Media and Aeorema Communications go up and down completely randomly.

Pair Corralation between Zinc Media and Aeorema Communications

Assuming the 90 days trading horizon Zinc Media Group is expected to under-perform the Aeorema Communications. But the stock apears to be less risky and, when comparing its historical volatility, Zinc Media Group is 1.01 times less risky than Aeorema Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Aeorema Communications Plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,840  in Aeorema Communications Plc on October 26, 2024 and sell it today you would lose (2,040) from holding Aeorema Communications Plc or give up 29.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Zinc Media Group  vs.  Aeorema Communications Plc

Zinc Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zinc Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zinc Media is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Aeorema Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aeorema Communications is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zinc Media and Aeorema Communications

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

The idea behind Zinc Media Group and Aeorema Communications 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.