Can any of the company-specific risk be diversified away by investing in both DZS and Ebang International 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 DZS and Ebang International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DZS Inc and Ebang International Holdings, you can compare the effects of market volatilities on DZS and Ebang International 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 DZS with a short position of Ebang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of DZS and Ebang International.
Diversification Opportunities for DZS and Ebang International
The 3 months correlation between DZS and Ebang is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding DZS Inc and Ebang International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebang International and DZS 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 DZS Inc are associated (or correlated) with Ebang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebang International has no effect on the direction of DZS i.e., DZS and Ebang International go up and down completely randomly.
Pair Corralation between DZS and Ebang International
Given the investment horizon of 90 days DZS Inc is expected to generate 1.72 times more return on investment than Ebang International. However, DZS is 1.72 times more volatile than Ebang International Holdings. It trades about 0.17 of its potential returns per unit of risk. Ebang International Holdings is currently generating about -0.04 per unit of risk. If you would invest 124.00 in DZS Inc on September 3, 2023 and sell it today you would earn a total of 29.00 from holding DZS Inc or generate 23.39% return on investment over 90 days.
Over the last 90 days DZS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
Over the last 90 days Ebang International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.
The main advantage of trading using opposite DZS and Ebang International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DZS position performs unexpectedly, Ebang International 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 Ebang International will offset losses from the drop in Ebang International's long position.
The idea behind DZS Inc and Ebang International Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Screen CEOs from public companies around the world
Macroaxis helps investors of all levels and skills to maximize the upside of all their holdings and minimize the risk
associated with market volatility, economic swings, and company-specific events. View terms and conditions