Correlation Between Zoom Video and DS Smith

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

Diversification Opportunities for Zoom Video and DS Smith

0.36

Correlation Coefficient

Zoom Video  DS Smith

Weak diversification

The 3 months correlation between Zoom and SMDS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and DS Smith PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DS Smith 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 DS Smith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DS Smith PLC has no effect on the direction of Zoom Video i.e., Zoom Video and DS Smith go up and down completely randomly.

Pair Corralation between Zoom Video and DS Smith

Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the DS Smith. In addition to that, Zoom Video is 1.4 times more volatile than DS Smith PLC. It trades about 0.0 of its total potential returns per unit of risk. DS Smith PLC is currently generating about 0.05 per unit of volatility. If you would invest  57,036  in DS Smith PLC on December 4, 2024 and sell it today you would earn a total of  1,214  from holding DS Smith PLC or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.41%
Values	Daily Returns

Zoom Video Communications  vs.  DS Smith PLC

Zoom Video Communications

Risk-Adjusted Performance

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.

DS Smith PLC

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Zoom Video and DS Smith

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

The idea behind Zoom Video Communications and DS Smith 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..