Correlation Between Zepp Health and Wearable Devices

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Can any of the company-specific risk be diversified away by investing in both Zepp Health and Wearable Devices 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 Wearable Devices 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 Wearable Devices, you can compare the effects of market volatilities on Zepp Health and Wearable Devices 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 Wearable Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zepp Health and Wearable Devices.

Diversification Opportunities for Zepp Health and Wearable Devices

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Zepp and Wearable is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices 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 Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of Zepp Health i.e., Zepp Health and Wearable Devices go up and down completely randomly.

Pair Corralation between Zepp Health and Wearable Devices

Given the investment horizon of 90 days Zepp Health Corp is expected to under-perform the Wearable Devices. But the stock apears to be less risky and, when comparing its historical volatility, Zepp Health Corp is 2.92 times less risky than Wearable Devices. The stock trades about -0.01 of its potential returns per unit of risk. The Wearable Devices is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  197.00  in Wearable Devices on March 13, 2025 and sell it today you would lose (38.00) from holding Wearable Devices or give up 19.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Zepp Health Corp  vs.  Wearable Devices

 Performance 
       Timeline  
Zepp Health Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
Wearable Devices 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Wearable Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Wearable Devices unveiled solid returns over the last few months and may actually be approaching a breakup point.

Zepp Health and Wearable Devices Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zepp Health and Wearable Devices

The main advantage of trading using opposite Zepp Health and Wearable Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zepp Health position performs unexpectedly, Wearable Devices 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 Wearable Devices will offset losses from the drop in Wearable Devices' long position.
The idea behind Zepp Health Corp and Wearable Devices 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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