Correlation Between Zota Health and Kingfa Science

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

By analyzing existing cross correlation between Zota Health Care and Kingfa Science Technology, you can compare the effects of market volatilities on Zota Health and Kingfa Science 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 Zota Health with a short position of Kingfa Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zota Health and Kingfa Science.

Diversification Opportunities for Zota Health and Kingfa Science

0.75

Correlation Coefficient

Zota Health  Kingfa Science

Poor diversification

The 3 months correlation between Zota and Kingfa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zota Health Care and Kingfa Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfa Science Technology and Zota Health 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 Zota Health Care are associated (or correlated) with Kingfa Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfa Science Technology has no effect on the direction of Zota Health i.e., Zota Health and Kingfa Science go up and down completely randomly.

Pair Corralation between Zota Health and Kingfa Science

Assuming the 90 days trading horizon Zota Health Care is expected to generate 1.24 times more return on investment than Kingfa Science. However, Zota Health is 1.24 times more volatile than Kingfa Science Technology. It trades about 0.32 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.14 per unit of risk. If you would invest  59,005  in Zota Health Care on October 9, 2024 and sell it today you would earn a total of  26,365  from holding Zota Health Care or generate 44.68% return on investment over 90 days.

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

Zota Health Care  vs.  Kingfa Science Technology

Zota Health Care

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zota Health Care are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zota Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kingfa Science Technology

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zota Health and Kingfa Science

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

The idea behind Zota Health Care and Kingfa Science Technology 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.