Correlation Between Zimplats Holdings and Compania

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

By analyzing existing cross correlation between Zimplats Holdings Limited and Compania de Minas, you can compare the effects of market volatilities on Zimplats Holdings and Compania 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 Zimplats Holdings with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zimplats Holdings and Compania.

Diversification Opportunities for Zimplats Holdings and Compania

0.49

Correlation Coefficient

Zimplats Holdings  Compania

Very weak diversification

The 3 months correlation between Zimplats and Compania is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Zimplats Holdings Limited and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and Zimplats Holdings 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 Zimplats Holdings Limited are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Zimplats Holdings i.e., Zimplats Holdings and Compania go up and down completely randomly.

Pair Corralation between Zimplats Holdings and Compania

Assuming the 90 days horizon Zimplats Holdings Limited is expected to under-perform the Compania. In addition to that, Zimplats Holdings is 1.06 times more volatile than Compania de Minas. It trades about -0.24 of its total potential returns per unit of risk. Compania de Minas is currently generating about -0.08 per unit of volatility. If you would invest  1,318  in Compania de Minas on October 15, 2024 and sell it today you would lose (48.00) from holding Compania de Minas or give up 3.64% of portfolio value over 90 days.

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

Zimplats Holdings Limited  vs.  Compania de Minas

Zimplats Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimplats Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Zimplats Holdings and Compania

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

The idea behind Zimplats Holdings Limited and Compania de Minas 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.