Correlation Between Zodiac Clothing and Styrenix Performance

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

By analyzing existing cross correlation between Zodiac Clothing and Styrenix Performance Materials, you can compare the effects of market volatilities on Zodiac Clothing and Styrenix Performance 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 Zodiac Clothing with a short position of Styrenix Performance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zodiac Clothing and Styrenix Performance.

Diversification Opportunities for Zodiac Clothing and Styrenix Performance

0.9

Correlation Coefficient

Zodiac Clothing  Styrenix Performance

Almost no diversification

The 3 months correlation between Zodiac and Styrenix is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Zodiac Clothing and Styrenix Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Styrenix Performance and Zodiac Clothing 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 Zodiac Clothing are associated (or correlated) with Styrenix Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Styrenix Performance has no effect on the direction of Zodiac Clothing i.e., Zodiac Clothing and Styrenix Performance go up and down completely randomly.

Pair Corralation between Zodiac Clothing and Styrenix Performance

Assuming the 90 days trading horizon Zodiac Clothing is expected to under-perform the Styrenix Performance. But the stock apears to be less risky and, when comparing its historical volatility, Zodiac Clothing is 1.02 times less risky than Styrenix Performance. The stock trades about -0.04 of its potential returns per unit of risk. The Styrenix Performance Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  219,441  in Styrenix Performance Materials on September 30, 2024 and sell it today you would earn a total of  73,664  from holding Styrenix Performance Materials or generate 33.57% return on investment over 90 days.

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

Zodiac Clothing  vs.  Styrenix Performance Materials

Zodiac Clothing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zodiac Clothing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Zodiac Clothing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Styrenix Performance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Styrenix Performance Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Styrenix Performance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zodiac Clothing and Styrenix Performance

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

The idea behind Zodiac Clothing and Styrenix Performance Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.