Correlation Between Advanced Medical and Zoom Video

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

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

Diversification Opportunities for Advanced Medical and Zoom Video

-0.25

Correlation Coefficient

Advanced Medical  Zoom Video

Very good diversification

The 3 months correlation between Advanced and Zoom is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions 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 Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and Zoom Video go up and down completely randomly.

Pair Corralation between Advanced Medical and Zoom Video

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to under-perform the Zoom Video. In addition to that, Advanced Medical is 1.5 times more volatile than Zoom Video Communications. It trades about -0.03 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.18 per unit of volatility. If you would invest  6,790  in Zoom Video Communications on September 13, 2024 and sell it today you would earn a total of  1,814  from holding Zoom Video Communications or generate 26.72% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  Zoom Video Communications

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Advanced Medical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Zoom Video Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 14 (%) 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.

Pair Trading with Advanced Medical and Zoom Video

The main advantage of trading using opposite Advanced Medical and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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 Advanced Medical Solutions 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.