Correlation Between Trade Desk and Zoom Video

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

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

Diversification Opportunities for Trade Desk and Zoom Video

0.85

Correlation Coefficient

Trade Desk  Zoom Video

Very poor diversification

The 3 months correlation between Trade and Zoom is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Trade Desk 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 Trade Desk 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 Trade Desk 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 Trade Desk i.e., Trade Desk and Zoom Video go up and down completely randomly.

Pair Corralation between Trade Desk and Zoom Video

Considering the 90-day investment horizon Trade Desk is expected to generate 1.05 times less return on investment than Zoom Video. In addition to that, Trade Desk is 1.02 times more volatile than Zoom Video Communications. It trades about 0.17 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.18 per unit of volatility. If you would invest  6,908  in Zoom Video Communications on August 30, 2024 and sell it today you would earn a total of  1,628  from holding Zoom Video Communications or generate 23.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Trade Desk  vs.  Zoom Video Communications

Trade Desk

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trade Desk are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Trade Desk exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 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 Trade Desk and Zoom Video

The main advantage of trading using opposite Trade Desk and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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 Trade Desk 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.