Correlation Between American States and Zoom Video

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

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

Diversification Opportunities for American States and Zoom Video

-0.13

Correlation Coefficient

American States  Zoom Video

Good diversification

The 3 months correlation between American and Zoom is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding American States Water 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 American States 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 American States Water 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 American States i.e., American States and Zoom Video go up and down completely randomly.

Pair Corralation between American States and Zoom Video

Assuming the 90 days trading horizon American States Water is expected to generate 0.77 times more return on investment than Zoom Video. However, American States Water is 1.29 times less risky than Zoom Video. It trades about -0.1 of its potential returns per unit of risk. Zoom Video Communications is currently generating about -0.11 per unit of risk. If you would invest  7,716  in American States Water on December 21, 2024 and sell it today you would lose (856.00) from holding American States Water or give up 11.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

American States Water  vs.  Zoom Video Communications

American States Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days American States Water 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.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with American States and Zoom Video

The main advantage of trading using opposite American States and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States 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 American States Water 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.