Correlation Between SIMPPLE and Zoom Video

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

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

Diversification Opportunities for SIMPPLE and Zoom Video

0.8

Correlation Coefficient

SIMPPLE  Zoom Video

Very poor diversification

The 3 months correlation between SIMPPLE and Zoom is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SIMPPLE LTD Ordinary 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 SIMPPLE 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 SIMPPLE LTD Ordinary 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 SIMPPLE i.e., SIMPPLE and Zoom Video go up and down completely randomly.

Pair Corralation between SIMPPLE and Zoom Video

Given the investment horizon of 90 days SIMPPLE LTD Ordinary is expected to generate 17.42 times more return on investment than Zoom Video. However, SIMPPLE is 17.42 times more volatile than Zoom Video Communications. It trades about 0.13 of its potential returns per unit of risk. Zoom Video Communications is currently generating about 0.2 per unit of risk. If you would invest  36.00  in SIMPPLE LTD Ordinary on September 12, 2024 and sell it today you would earn a total of  65.00  from holding SIMPPLE LTD Ordinary or generate 180.56% return on investment over 90 days.

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

SIMPPLE LTD Ordinary  vs.  Zoom Video Communications

SIMPPLE LTD Ordinary

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMPPLE LTD Ordinary are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, SIMPPLE disclosed solid returns over the last few months and may actually be approaching a breakup point.

Zoom Video Communications

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMPPLE and Zoom Video

The main advantage of trading using opposite SIMPPLE and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMPPLE 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 SIMPPLE LTD Ordinary 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.