Correlation Between Air Products and Zoom Video

Can any of the company-specific risk be diversified away by investing in both Air Products and Zoom Video 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 Air Products and Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Products and and Zoom Video Communications, you can compare the effects of market volatilities on Air Products and Zoom Video 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 Air Products with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Zoom Video.

Diversification Opportunities for Air Products and Zoom Video

0.64

Correlation Coefficient

Air Products  Zoom Video

Poor diversification

The 3 months correlation between Air and Zoom is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications and Air Products 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 Air Products and are associated (or correlated) with Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of Air Products i.e., Air Products and Zoom Video go up and down completely randomly.

Pair Corralation between Air Products and Zoom Video

Assuming the 90 days trading horizon Air Products and is expected to under-perform the Zoom Video. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 1.07 times less risky than Zoom Video. The stock trades about -0.34 of its potential returns per unit of risk. The Zoom Video Communications is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,028  in Zoom Video Communications on October 11, 2024 and sell it today you would lose (76.00) from holding Zoom Video Communications or give up 3.75% of portfolio value over 90 days.

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

Air Products and  vs.  Zoom Video Communications

Air Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Air Products is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Zoom Video Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoom Video sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Products and Zoom Video

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

The idea behind Air Products and and Zoom Video Communications 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.