Correlation Between Ree Automotive and Ermenegildo Zegna

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

By analyzing existing cross correlation between Ree Automotive Holding and Ermenegildo Zegna NV, you can compare the effects of market volatilities on Ree Automotive and Ermenegildo Zegna 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 Ree Automotive with a short position of Ermenegildo Zegna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ree Automotive and Ermenegildo Zegna.

Diversification Opportunities for Ree Automotive and Ermenegildo Zegna

-0.77

Correlation Coefficient

Ree Automotive  Ermenegildo Zegna

Pay attention - limited upside

The 3 months correlation between Ree and Ermenegildo is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ree Automotive Holding and Ermenegildo Zegna NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ermenegildo Zegna and Ree Automotive 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 Ree Automotive Holding are associated (or correlated) with Ermenegildo Zegna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ermenegildo Zegna has no effect on the direction of Ree Automotive i.e., Ree Automotive and Ermenegildo Zegna go up and down completely randomly.

Pair Corralation between Ree Automotive and Ermenegildo Zegna

Considering the 90-day investment horizon Ree Automotive Holding is expected to generate 2.9 times more return on investment than Ermenegildo Zegna. However, Ree Automotive is 2.9 times more volatile than Ermenegildo Zegna NV. It trades about 0.19 of its potential returns per unit of risk. Ermenegildo Zegna NV is currently generating about -0.11 per unit of risk. If you would invest  330.00  in Ree Automotive Holding on September 2, 2024 and sell it today you would earn a total of  443.00  from holding Ree Automotive Holding or generate 134.24% return on investment over 90 days.

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

Ree Automotive Holding  vs.  Ermenegildo Zegna NV

Ree Automotive Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ree Automotive Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ree Automotive exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ermenegildo Zegna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ermenegildo Zegna NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ree Automotive and Ermenegildo Zegna

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

The idea behind Ree Automotive Holding and Ermenegildo Zegna NV 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 Global Correlations module to find global opportunities by holding instruments from different markets.