Correlation Between BAIC and Zapp Electric

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

By analyzing existing cross correlation between BAIC Motor and Zapp Electric Vehicles, you can compare the effects of market volatilities on BAIC and Zapp Electric 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 BAIC with a short position of Zapp Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAIC and Zapp Electric.

Diversification Opportunities for BAIC and Zapp Electric

0.05

Correlation Coefficient

BAIC  Zapp Electric

Significant diversification

The 3 months correlation between BAIC and Zapp is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BAIC Motor and Zapp Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapp Electric Vehicles and BAIC 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 BAIC Motor are associated (or correlated) with Zapp Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapp Electric Vehicles has no effect on the direction of BAIC i.e., BAIC and Zapp Electric go up and down completely randomly.

Pair Corralation between BAIC and Zapp Electric

Assuming the 90 days horizon BAIC is expected to generate 199.69 times less return on investment than Zapp Electric. But when comparing it to its historical volatility, BAIC Motor is 4.72 times less risky than Zapp Electric. It trades about 0.01 of its potential returns per unit of risk. Zapp Electric Vehicles is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.79  in Zapp Electric Vehicles on September 16, 2024 and sell it today you would earn a total of  0.18  from holding Zapp Electric Vehicles or generate 22.78% return on investment over 90 days.

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

BAIC Motor  vs.  Zapp Electric Vehicles

BAIC Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BAIC Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, BAIC reported solid returns over the last few months and may actually be approaching a breakup point.

Zapp Electric Vehicles

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zapp Electric Vehicles are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Zapp Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BAIC and Zapp Electric

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

The idea behind BAIC Motor and Zapp Electric Vehicles 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.