Correlation Between Zoom Video and Dollar General

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

Diversification Opportunities for Zoom Video and Dollar General

0.09

Correlation Coefficient

Zoom Video  Dollar General

Significant diversification

The 3 months correlation between Zoom and Dollar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General 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 Dollar General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar General has no effect on the direction of Zoom Video i.e., Zoom Video and Dollar General go up and down completely randomly.

Pair Corralation between Zoom Video and Dollar General

Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the Dollar General. In addition to that, Zoom Video is 1.56 times more volatile than Dollar General. It trades about -0.25 of its total potential returns per unit of risk. Dollar General is currently generating about 0.08 per unit of volatility. If you would invest  6,866  in Dollar General on December 4, 2024 and sell it today you would earn a total of  207.00  from holding Dollar General or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Zoom Video Communications  vs.  Dollar General

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Dollar General

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dollar General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dollar General is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zoom Video and Dollar General

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

The idea behind Zoom Video Communications and Dollar General 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.