Correlation Between FirstGroup PLC and Zotefoams PLC

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

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

Diversification Opportunities for FirstGroup PLC and Zotefoams PLC

0.85

Correlation Coefficient

FirstGroup PLC  Zotefoams PLC

Very poor diversification

The 3 months correlation between FirstGroup and Zotefoams is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding FirstGroup PLC and Zotefoams PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zotefoams PLC and FirstGroup PLC 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 FirstGroup PLC are associated (or correlated) with Zotefoams PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zotefoams PLC has no effect on the direction of FirstGroup PLC i.e., FirstGroup PLC and Zotefoams PLC go up and down completely randomly.

Pair Corralation between FirstGroup PLC and Zotefoams PLC

Assuming the 90 days trading horizon FirstGroup PLC is expected to generate 1.02 times less return on investment than Zotefoams PLC. But when comparing it to its historical volatility, FirstGroup PLC is 1.46 times less risky than Zotefoams PLC. It trades about 0.27 of its potential returns per unit of risk. Zotefoams PLC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  23,696  in Zotefoams PLC on April 25, 2025 and sell it today you would earn a total of  8,504  from holding Zotefoams PLC or generate 35.89% return on investment over 90 days.

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

FirstGroup PLC  vs.  Zotefoams PLC

FirstGroup PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup PLC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, FirstGroup PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Zotefoams PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zotefoams PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Zotefoams PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FirstGroup PLC and Zotefoams PLC

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

The idea behind FirstGroup PLC and Zotefoams PLC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.