Correlation Between Zydus Wellness and Zota Health

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

By analyzing existing cross correlation between Zydus Wellness Limited and Zota Health Care, you can compare the effects of market volatilities on Zydus Wellness and Zota Health 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 Zydus Wellness with a short position of Zota Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zydus Wellness and Zota Health.

Diversification Opportunities for Zydus Wellness and Zota Health

0.4

Correlation Coefficient

Zydus Wellness  Zota Health

Very weak diversification

The 3 months correlation between Zydus and Zota is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Zydus Wellness Limited and Zota Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zota Health Care and Zydus Wellness 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 Zydus Wellness Limited are associated (or correlated) with Zota Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zota Health Care has no effect on the direction of Zydus Wellness i.e., Zydus Wellness and Zota Health go up and down completely randomly.

Pair Corralation between Zydus Wellness and Zota Health

Assuming the 90 days trading horizon Zydus Wellness is expected to generate 22.07 times less return on investment than Zota Health. But when comparing it to its historical volatility, Zydus Wellness Limited is 2.34 times less risky than Zota Health. It trades about 0.05 of its potential returns per unit of risk. Zota Health Care is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  55,475  in Zota Health Care on September 21, 2024 and sell it today you would earn a total of  22,895  from holding Zota Health Care or generate 41.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Zydus Wellness Limited  vs.  Zota Health Care

Zydus Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zydus Wellness Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Zota Health Care

Risk-Adjusted Performance

9 of 100

Good

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

Pair Trading with Zydus Wellness and Zota Health

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

The idea behind Zydus Wellness Limited and Zota Health Care 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.