Correlation Between ZALANDO SE and Barratt Developments

Can any of the company-specific risk be diversified away by investing in both ZALANDO SE and Barratt Developments 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 ZALANDO SE and Barratt Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZALANDO SE ADR and Barratt Developments PLC, you can compare the effects of market volatilities on ZALANDO SE and Barratt Developments 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 ZALANDO SE with a short position of Barratt Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZALANDO SE and Barratt Developments.

Diversification Opportunities for ZALANDO SE and Barratt Developments

0.59

Correlation Coefficient

ZALANDO SE  Barratt Developments

Very weak diversification

The 3 months correlation between ZALANDO and Barratt is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ZALANDO SE ADR and Barratt Developments PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barratt Developments PLC and ZALANDO SE 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 ZALANDO SE ADR are associated (or correlated) with Barratt Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barratt Developments PLC has no effect on the direction of ZALANDO SE i.e., ZALANDO SE and Barratt Developments go up and down completely randomly.

Pair Corralation between ZALANDO SE and Barratt Developments

Assuming the 90 days horizon ZALANDO SE ADR is expected to generate 1.25 times more return on investment than Barratt Developments. However, ZALANDO SE is 1.25 times more volatile than Barratt Developments PLC. It trades about 0.01 of its potential returns per unit of risk. Barratt Developments PLC is currently generating about -0.01 per unit of risk. If you would invest  1,702  in ZALANDO SE ADR on December 27, 2024 and sell it today you would earn a total of  0.00  from holding ZALANDO SE ADR or generate 0.0% return on investment over 90 days.

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

ZALANDO SE ADR  vs.  Barratt Developments PLC

ZALANDO SE ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ZALANDO SE ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, ZALANDO SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Barratt Developments PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barratt Developments PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Barratt Developments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ZALANDO SE and Barratt Developments

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

The idea behind ZALANDO SE ADR and Barratt Developments 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.