Correlation Between Zoom Video and China Merchants

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

Diversification Opportunities for Zoom Video and China Merchants

-0.24

Correlation Coefficient

Zoom Video  China Merchants

Very good diversification

The 3 months correlation between Zoom and China is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of Zoom Video i.e., Zoom Video and China Merchants go up and down completely randomly.

Pair Corralation between Zoom Video and China Merchants

Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, Zoom Video Communications is 1.1 times less risky than China Merchants. The stock trades about -0.16 of its potential returns per unit of risk. The China Merchants Port is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  154.00  in China Merchants Port on October 25, 2024 and sell it today you would earn a total of  0.00  from holding China Merchants Port or generate 0.0% return on investment over 90 days.

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

Zoom Video Communications  vs.  China Merchants Port

Zoom Video Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Merchants Port

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Merchants 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 China Merchants

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

The idea behind Zoom Video Communications and China Merchants Port 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.