Correlation Between Zoom Video and Pure Storage

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

Diversification Opportunities for Zoom Video and Pure Storage

0.59

Correlation Coefficient

Zoom Video  Pure Storage

Very weak diversification

The 3 months correlation between Zoom and Pure is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Zoom Video i.e., Zoom Video and Pure Storage go up and down completely randomly.

Pair Corralation between Zoom Video and Pure Storage

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 0.67 times more return on investment than Pure Storage. However, Zoom Video Communications is 1.5 times less risky than Pure Storage. It trades about -0.12 of its potential returns per unit of risk. Pure Storage is currently generating about -0.12 per unit of risk. If you would invest  8,179  in Zoom Video Communications on December 20, 2024 and sell it today you would lose (1,349) from holding Zoom Video Communications or give up 16.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Zoom Video Communications  vs.  Pure Storage

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pure Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Zoom Video and Pure Storage

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

The idea behind Zoom Video Communications and Pure Storage 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.