Correlation Between Light Science and Zoom Video

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

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

Diversification Opportunities for Light Science and Zoom Video

0.06

Correlation Coefficient

Light Science  Zoom Video

Significant diversification

The 3 months correlation between Light and Zoom is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Light Science Technologies 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 Light Science 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 Light Science Technologies 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 Light Science i.e., Light Science and Zoom Video go up and down completely randomly.

Pair Corralation between Light Science and Zoom Video

Assuming the 90 days trading horizon Light Science Technologies is expected to under-perform the Zoom Video. In addition to that, Light Science is 2.55 times more volatile than Zoom Video Communications. It trades about -0.2 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about -0.31 per unit of volatility. If you would invest  8,540  in Zoom Video Communications on October 26, 2024 and sell it today you would lose (579.00) from holding Zoom Video Communications or give up 6.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Light Science Technologies  vs.  Zoom Video Communications

Light Science Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Science Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Zoom Video Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zoom Video may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Light Science and Zoom Video

The main advantage of trading using opposite Light Science and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Science 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 Light Science Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.