Correlation Between Zoom Video and Public Service

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

By analyzing existing cross correlation between Zoom Video Communications and Public Service Enterprise, you can compare the effects of market volatilities on Zoom Video and Public Service 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 Zoom Video with a short position of Public Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Public Service.

Diversification Opportunities for Zoom Video and Public Service

-0.24

Correlation Coefficient

Zoom Video  Public Service

Very good diversification

The 3 months correlation between Zoom and Public is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Public Service Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service Enterprise and Zoom Video 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 Zoom Video Communications are associated (or correlated) with Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service Enterprise has no effect on the direction of Zoom Video i.e., Zoom Video and Public Service go up and down completely randomly.

Pair Corralation between Zoom Video and Public Service

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.54 times more return on investment than Public Service. However, Zoom Video is 1.54 times more volatile than Public Service Enterprise. It trades about 0.14 of its potential returns per unit of risk. Public Service Enterprise is currently generating about -0.07 per unit of risk. If you would invest  6,812  in Zoom Video Communications on October 5, 2024 and sell it today you would earn a total of  1,285  from holding Zoom Video Communications or generate 18.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Zoom Video Communications  vs.  Public Service Enterprise

Zoom Video Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

Public Service Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Service Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Public Service is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zoom Video and Public Service

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

The idea behind Zoom Video Communications and Public Service Enterprise 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.