Correlation Between Zoom Video and Vodafone Group

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

Diversification Opportunities for Zoom Video and Vodafone Group

0.33

Correlation Coefficient

Zoom Video  Vodafone Group

Weak diversification

The 3 months correlation between Zoom and Vodafone is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Zoom Video i.e., Zoom Video and Vodafone Group go up and down completely randomly.

Pair Corralation between Zoom Video and Vodafone Group

Assuming the 90 days trading horizon Zoom Video is expected to generate 23.63 times less return on investment than Vodafone Group. But when comparing it to its historical volatility, Zoom Video Communications is 1.07 times less risky than Vodafone Group. It trades about 0.0 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,722  in Vodafone Group PLC on December 30, 2024 and sell it today you would earn a total of  602.00  from holding Vodafone Group PLC or generate 8.96% return on investment over 90 days.

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

Zoom Video Communications  vs.  Vodafone 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.

Vodafone Group PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Vodafone Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zoom Video and Vodafone Group

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

The idea behind Zoom Video Communications and Vodafone 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.