Correlation Between Shell Plc and Zoom Video

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

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

Diversification Opportunities for Shell Plc and Zoom Video

-0.02

Correlation Coefficient

Shell Plc  Zoom Video

Good diversification

The 3 months correlation between Shell and Zoom is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shell plc 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 Shell Plc 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 Shell plc 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 Shell Plc i.e., Shell Plc and Zoom Video go up and down completely randomly.

Pair Corralation between Shell Plc and Zoom Video

Assuming the 90 days trading horizon Shell plc is expected to under-perform the Zoom Video. But the stock apears to be less risky and, when comparing its historical volatility, Shell plc is 1.64 times less risky than Zoom Video. The stock trades about -0.02 of its potential returns per unit of risk. The Zoom Video Communications is currently generating about 0.18 of returns per unit of risk over similar time horizon. 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

Shell plc  vs.  Zoom Video Communications

Shell plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shell plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Shell Plc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Shell Plc and Zoom Video

The main advantage of trading using opposite Shell Plc and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell Plc 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 Shell plc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.