Correlation Between ZEN and CHP

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

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

Diversification Opportunities for ZEN and CHP

-0.16

Correlation Coefficient

ZEN  CHP

Good diversification

The 3 months correlation between ZEN and CHP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ZEN and CHP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHP and ZEN 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 ZEN are associated (or correlated) with CHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHP has no effect on the direction of ZEN i.e., ZEN and CHP go up and down completely randomly.

Pair Corralation between ZEN and CHP

Assuming the 90 days trading horizon ZEN is expected to generate 0.38 times more return on investment than CHP. However, ZEN is 2.66 times less risky than CHP. It trades about -0.03 of its potential returns per unit of risk. CHP is currently generating about -0.13 per unit of risk. If you would invest  1,126  in ZEN on January 29, 2024 and sell it today you would lose (233.00) from holding ZEN or give up 20.69% of portfolio value over 90 days.

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

ZEN  vs.  CHP

ZEN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZEN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ZEN exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CHP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZEN and CHP

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

The idea behind ZEN and CHP 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.