Correlation Between BASE and Zoom Video

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

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

Diversification Opportunities for BASE and Zoom Video

0.01

Correlation Coefficient

BASE  Zoom Video

Significant diversification

The 3 months correlation between BASE and Zoom is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc 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 BASE 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 BASE Inc 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 BASE i.e., BASE and Zoom Video go up and down completely randomly.

Pair Corralation between BASE and Zoom Video

Assuming the 90 days horizon BASE is expected to generate 1.02 times less return on investment than Zoom Video. In addition to that, BASE is 1.54 times more volatile than Zoom Video Communications. It trades about 0.02 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.03 per unit of volatility. If you would invest  6,666  in Zoom Video Communications on September 23, 2024 and sell it today you would earn a total of  1,894  from holding Zoom Video Communications or generate 28.41% return on investment over 90 days.

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

BASE Inc  vs.  Zoom Video Communications

BASE Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, BASE reported solid returns over the last few months and may actually be approaching a breakup point.

Zoom Video Communications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASE and Zoom Video

The main advantage of trading using opposite BASE and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASE 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 BASE Inc 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.