Correlation Between Zodiac Clothing and Investment Trust

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

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

Diversification Opportunities for Zodiac Clothing and Investment Trust

0.06

Correlation Coefficient

Zodiac Clothing  Investment Trust

Significant diversification

The 3 months correlation between Zodiac and Investment is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Zodiac Clothing and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and Zodiac Clothing 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 Zodiac Clothing 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 Zodiac Clothing i.e., Zodiac Clothing and Investment Trust go up and down completely randomly.

Pair Corralation between Zodiac Clothing and Investment Trust

Assuming the 90 days trading horizon Zodiac Clothing is expected to generate 0.95 times more return on investment than Investment Trust. However, Zodiac Clothing is 1.06 times less risky than Investment Trust. It trades about 0.05 of its potential returns per unit of risk. The Investment Trust is currently generating about -0.01 per unit of risk. If you would invest  12,460  in Zodiac Clothing on September 29, 2024 and sell it today you would earn a total of  796.00  from holding Zodiac Clothing or generate 6.39% return on investment over 90 days.

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

Zodiac Clothing  vs.  The Investment Trust

Zodiac Clothing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zodiac Clothing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Zodiac Clothing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Investment Trust

Risk-Adjusted Performance

0 of 100

Very 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zodiac Clothing and Investment Trust

The main advantage of trading using opposite Zodiac Clothing and Investment Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zodiac Clothing 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 Zodiac Clothing 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.