Correlation Between Zoom Video and SMA Solar

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

Diversification Opportunities for Zoom Video and SMA Solar

-0.71

Correlation Coefficient

Zoom Video  SMA Solar

Pay attention - limited upside

The 3 months correlation between Zoom and SMA is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Zoom Video i.e., Zoom Video and SMA Solar go up and down completely randomly.

Pair Corralation between Zoom Video and SMA Solar

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 0.57 times more return on investment than SMA Solar. However, Zoom Video Communications is 1.76 times less risky than SMA Solar. It trades about 0.14 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.04 per unit of risk. If you would invest  6,818  in Zoom Video Communications on October 4, 2024 and sell it today you would earn a total of  1,279  from holding Zoom Video Communications or generate 18.76% return on investment over 90 days.

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

Zoom Video Communications  vs.  SMA Solar Technology

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.

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Zoom Video and SMA Solar

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

The idea behind Zoom Video Communications and SMA Solar Technology 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.