Correlation Between Zegona Communications and Dotdigital Group

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

By analyzing existing cross correlation between Zegona Communications Plc and Dotdigital Group Plc, you can compare the effects of market volatilities on Zegona Communications and Dotdigital Group 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 Zegona Communications with a short position of Dotdigital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and Dotdigital Group.

Diversification Opportunities for Zegona Communications and Dotdigital Group

-0.27

Correlation Coefficient

Zegona Communications  Dotdigital Group

Very good diversification

The 3 months correlation between Zegona and Dotdigital is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Dotdigital Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dotdigital Group Plc and Zegona Communications 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 Zegona Communications Plc are associated (or correlated) with Dotdigital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dotdigital Group Plc has no effect on the direction of Zegona Communications i.e., Zegona Communications and Dotdigital Group go up and down completely randomly.

Pair Corralation between Zegona Communications and Dotdigital Group

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.33 times more return on investment than Dotdigital Group. However, Zegona Communications is 1.33 times more volatile than Dotdigital Group Plc. It trades about 0.12 of its potential returns per unit of risk. Dotdigital Group Plc is currently generating about 0.01 per unit of risk. If you would invest  16,300  in Zegona Communications Plc on September 27, 2024 and sell it today you would earn a total of  24,300  from holding Zegona Communications Plc or generate 149.08% return on investment over 90 days.

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

Zegona Communications Plc  vs.  Dotdigital Group Plc

Zegona Communications Plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Zegona Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dotdigital Group Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dotdigital Group Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dotdigital Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zegona Communications and Dotdigital Group

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

The idea behind Zegona Communications Plc and Dotdigital Group Plc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.