Correlation Between Modi Rubber and ZF Commercial

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

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

Diversification Opportunities for Modi Rubber and ZF Commercial

-0.03

Correlation Coefficient

Modi Rubber  ZF Commercial

Good diversification

The 3 months correlation between Modi and ZFCVINDIA is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Modi Rubber Limited and ZF Commercial Vehicle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZF Commercial Vehicle and Modi Rubber 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 Modi Rubber Limited are associated (or correlated) with ZF Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZF Commercial Vehicle has no effect on the direction of Modi Rubber i.e., Modi Rubber and ZF Commercial go up and down completely randomly.

Pair Corralation between Modi Rubber and ZF Commercial

Assuming the 90 days trading horizon Modi Rubber Limited is expected to generate 2.79 times more return on investment than ZF Commercial. However, Modi Rubber is 2.79 times more volatile than ZF Commercial Vehicle. It trades about 0.09 of its potential returns per unit of risk. ZF Commercial Vehicle is currently generating about -0.01 per unit of risk. If you would invest  10,385  in Modi Rubber Limited on April 17, 2025 and sell it today you would earn a total of  2,419  from holding Modi Rubber Limited or generate 23.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Modi Rubber Limited  vs.  ZF Commercial Vehicle

Modi Rubber Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Modi Rubber Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Modi Rubber sustained solid returns over the last few months and may actually be approaching a breakup point.

ZF Commercial Vehicle

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZF Commercial Vehicle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ZF Commercial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Modi Rubber and ZF Commercial

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

The idea behind Modi Rubber Limited and ZF Commercial Vehicle 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.