Correlation Between Zenvia and China Merchants

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

By analyzing existing cross correlation between Zenvia Inc and China Merchants Port, you can compare the effects of market volatilities on Zenvia and China Merchants 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 Zenvia with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zenvia and China Merchants.

Diversification Opportunities for Zenvia and China Merchants

-0.43

Correlation Coefficient

Zenvia  China Merchants

Very good diversification

The 3 months correlation between Zenvia and China is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zenvia Inc and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port and Zenvia 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 Zenvia Inc are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of Zenvia i.e., Zenvia and China Merchants go up and down completely randomly.

Pair Corralation between Zenvia and China Merchants

Given the investment horizon of 90 days Zenvia Inc is expected to generate 1.96 times more return on investment than China Merchants. However, Zenvia is 1.96 times more volatile than China Merchants Port. It trades about 0.12 of its potential returns per unit of risk. China Merchants Port is currently generating about 0.04 per unit of risk. If you would invest  152.00  in Zenvia Inc on October 1, 2024 and sell it today you would earn a total of  61.00  from holding Zenvia Inc or generate 40.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Zenvia Inc  vs.  China Merchants Port

Zenvia Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zenvia Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Zenvia showed solid returns over the last few months and may actually be approaching a breakup point.

China Merchants Port

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, China Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zenvia and China Merchants

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

The idea behind Zenvia Inc and China Merchants Port 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.