Correlation Between Zepp Health and GoPro

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

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

Diversification Opportunities for Zepp Health and GoPro

0.81

Correlation Coefficient

Zepp Health  GoPro

Very poor diversification

The 3 months correlation between Zepp and GoPro is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc and Zepp Health 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 Zepp Health Corp are associated (or correlated) with GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Zepp Health i.e., Zepp Health and GoPro go up and down completely randomly.

Pair Corralation between Zepp Health and GoPro

Given the investment horizon of 90 days Zepp Health Corp is expected to generate 0.82 times more return on investment than GoPro. However, Zepp Health Corp is 1.22 times less risky than GoPro. It trades about -0.41 of its potential returns per unit of risk. GoPro Inc is currently generating about -0.46 per unit of risk. If you would invest  102.00  in Zepp Health Corp on January 28, 2024 and sell it today you would lose (17.00) from holding Zepp Health Corp or give up 16.67% of portfolio value over 90 days.

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

Zepp Health Corp  vs.  GoPro Inc

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Zepp Health and GoPro

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

The idea behind Zepp Health Corp and GoPro 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.