Correlation Between Zimplats Holdings and Fagron NV

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

By analyzing existing cross correlation between Zimplats Holdings Limited and Fagron NV, you can compare the effects of market volatilities on Zimplats Holdings and Fagron NV 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 Zimplats Holdings with a short position of Fagron NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zimplats Holdings and Fagron NV.

Diversification Opportunities for Zimplats Holdings and Fagron NV

0.19

Correlation Coefficient

Zimplats Holdings  Fagron NV

Average diversification

The 3 months correlation between Zimplats and Fagron is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Zimplats Holdings Limited and Fagron NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fagron NV and Zimplats Holdings 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 Zimplats Holdings Limited are associated (or correlated) with Fagron NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fagron NV has no effect on the direction of Zimplats Holdings i.e., Zimplats Holdings and Fagron NV go up and down completely randomly.

Pair Corralation between Zimplats Holdings and Fagron NV

Assuming the 90 days horizon Zimplats Holdings Limited is expected to under-perform the Fagron NV. In addition to that, Zimplats Holdings is 3.38 times more volatile than Fagron NV. It trades about -0.03 of its total potential returns per unit of risk. Fagron NV is currently generating about -0.04 per unit of volatility. If you would invest  1,918  in Fagron NV on September 2, 2024 and sell it today you would lose (50.00) from holding Fagron NV or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Zimplats Holdings Limited  vs.  Fagron NV

Zimplats Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimplats Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Zimplats Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fagron NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fagron NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fagron NV is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Zimplats Holdings and Fagron NV

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

The idea behind Zimplats Holdings Limited and Fagron 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.