Correlation Between Zoom Video and Unite Group

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

Diversification Opportunities for Zoom Video and Unite Group

-0.61

Correlation Coefficient

Zoom Video  Unite Group

Excellent diversification

The 3 months correlation between Zoom and Unite is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Unite Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unite Group 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 Unite Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unite Group PLC has no effect on the direction of Zoom Video i.e., Zoom Video and Unite Group go up and down completely randomly.

Pair Corralation between Zoom Video and Unite Group

Assuming the 90 days trading horizon Zoom Video is expected to generate 4.37 times less return on investment than Unite Group. In addition to that, Zoom Video is 1.53 times more volatile than Unite Group PLC. It trades about 0.0 of its total potential returns per unit of risk. Unite Group PLC is currently generating about 0.02 per unit of volatility. If you would invest  80,350  in Unite Group PLC on December 29, 2024 and sell it today you would earn a total of  1,100  from holding Unite Group PLC or generate 1.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	64.06%
Values	Daily Returns

Zoom Video Communications  vs.  Unite Group 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.

Unite Group PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unite Group PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Unite Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zoom Video and Unite Group

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

The idea behind Zoom Video Communications and Unite Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.