Correlation Between ZF Commercial and Investment Trust

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

By analyzing existing cross correlation between ZF Commercial Vehicle and The Investment Trust, you can compare the effects of market volatilities on ZF Commercial and Investment Trust 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 ZF Commercial with a short position of Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZF Commercial and Investment Trust.

Diversification Opportunities for ZF Commercial and Investment Trust

-0.36

Correlation Coefficient

ZF Commercial  Investment Trust

Very good diversification

The 3 months correlation between ZFCVINDIA and Investment is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of ZF Commercial i.e., ZF Commercial and Investment Trust go up and down completely randomly.

Pair Corralation between ZF Commercial and Investment Trust

Assuming the 90 days trading horizon ZF Commercial is expected to generate 2.6 times less return on investment than Investment Trust. But when comparing it to its historical volatility, ZF Commercial Vehicle is 1.29 times less risky than Investment Trust. It trades about 0.04 of its potential returns per unit of risk. The Investment Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,115  in The Investment Trust on September 24, 2024 and sell it today you would earn a total of  11,144  from holding The Investment Trust or generate 122.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

ZF Commercial Vehicle  vs.  The Investment Trust

ZF Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZF Commercial Vehicle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Investment Trust

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ZF Commercial and Investment Trust

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

The idea behind ZF Commercial Vehicle and The Investment Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .