Correlation Between Zedcor Energy and TeraGo

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

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

Diversification Opportunities for Zedcor Energy and TeraGo

0.82

Correlation Coefficient

Zedcor Energy  TeraGo

Very poor diversification

The 3 months correlation between Zedcor and TeraGo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zedcor Energy and TeraGo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TeraGo Inc and Zedcor Energy 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 Zedcor Energy are associated (or correlated) with TeraGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TeraGo Inc has no effect on the direction of Zedcor Energy i.e., Zedcor Energy and TeraGo go up and down completely randomly.

Pair Corralation between Zedcor Energy and TeraGo

Assuming the 90 days horizon Zedcor Energy is expected to generate 1.09 times less return on investment than TeraGo. But when comparing it to its historical volatility, Zedcor Energy is 1.34 times less risky than TeraGo. It trades about 0.17 of its potential returns per unit of risk. TeraGo Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  178.00  in TeraGo Inc on February 20, 2024 and sell it today you would earn a total of  25.00  from holding TeraGo Inc or generate 14.04% return on investment over 90 days.

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

Zedcor Energy  vs.  TeraGo Inc

Zedcor Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zedcor Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Zedcor Energy showed solid returns over the last few months and may actually be approaching a breakup point.

TeraGo Inc

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Zedcor Energy and TeraGo

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

The idea behind Zedcor Energy and TeraGo Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.