Correlation Between Zonetail and Global Warming

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

By analyzing existing cross correlation between Zonetail and Global Warming Solut, you can compare the effects of market volatilities on Zonetail and Global Warming 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 Zonetail with a short position of Global Warming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zonetail and Global Warming.

Diversification Opportunities for Zonetail and Global Warming

-0.5

Correlation Coefficient

Zonetail  Global Warming

Very good diversification

The 3 months correlation between Zonetail and Global is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zonetail and Global Warming Solut in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Warming Solut and Zonetail 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 Zonetail are associated (or correlated) with Global Warming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Warming Solut has no effect on the direction of Zonetail i.e., Zonetail and Global Warming go up and down completely randomly.

Pair Corralation between Zonetail and Global Warming

Assuming the 90 days horizon Zonetail is expected to generate 7.7 times less return on investment than Global Warming. But when comparing it to its historical volatility, Zonetail is 1.1 times less risky than Global Warming. It trades about 0.03 of its potential returns per unit of risk. Global Warming Solut is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Global Warming Solut on September 17, 2024 and sell it today you would earn a total of  76.00  from holding Global Warming Solut or generate 90.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Zonetail  vs.  Global Warming Solut

Zonetail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zonetail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Global Warming Solut

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Warming Solut are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global Warming displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zonetail and Global Warming

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

The idea behind Zonetail and Global Warming Solut 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.