Correlation Between Zoom Video and BP PLC

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

Diversification Opportunities for Zoom Video and BP PLC

-0.6

Correlation Coefficient

Zoom Video  BP PLC

Excellent diversification

The 3 months correlation between Zoom and BP PLC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and BP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC 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 BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC has no effect on the direction of Zoom Video i.e., Zoom Video and BP PLC go up and down completely randomly.

Pair Corralation between Zoom Video and BP PLC

Assuming the 90 days trading horizon Zoom Video is expected to generate 34.43 times less return on investment than BP PLC. In addition to that, Zoom Video is 1.05 times more volatile than BP PLC. It trades about 0.0 of its total potential returns per unit of risk. BP PLC is currently generating about 0.13 per unit of volatility. If you would invest  38,149  in BP PLC on December 30, 2024 and sell it today you would earn a total of  5,401  from holding BP PLC or generate 14.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	63.08%
Values	Daily Returns

Zoom Video Communications  vs.  BP PLC

Zoom Video Communications

Risk-Adjusted Performance

Very Weak

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

BP PLC

Risk-Adjusted Performance

OK

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

Pair Trading with Zoom Video and BP PLC

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

The idea behind Zoom Video Communications and BP PLC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.