Correlation Between Armada Hflr and Zimplats Holdings

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

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

Diversification Opportunities for Armada Hflr and Zimplats Holdings

0.15

Correlation Coefficient

Armada Hflr  Zimplats Holdings

Average diversification

The 3 months correlation between Armada and Zimplats is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Zimplats Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimplats Holdings and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with Zimplats Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimplats Holdings has no effect on the direction of Armada Hflr i.e., Armada Hflr and Zimplats Holdings go up and down completely randomly.

Pair Corralation between Armada Hflr and Zimplats Holdings

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Zimplats Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 2.11 times less risky than Zimplats Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The Zimplats Holdings Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  956.00  in Zimplats Holdings Limited on September 24, 2024 and sell it today you would lose (44.00) from holding Zimplats Holdings Limited or give up 4.6% of portfolio value over 90 days.

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

Armada Hflr Pr  vs.  Zimplats Holdings Limited

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 nearly stable essential indicators, Zimplats Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Armada Hflr and Zimplats Holdings

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

The idea behind Armada Hflr Pr and Zimplats Holdings Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.