Correlation Between Zoom Video and Chevron

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

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

Diversification Opportunities for Zoom Video and Chevron

0.54

Correlation Coefficient

Zoom Video  Chevron

Very weak diversification

The 3 months correlation between Zoom and Chevron is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and Zoom Video 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 Zoom Video Communications are associated (or correlated) with Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of Zoom Video i.e., Zoom Video and Chevron go up and down completely randomly.

Pair Corralation between Zoom Video and Chevron

Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the Chevron. In addition to that, Zoom Video is 1.07 times more volatile than Chevron. It trades about -0.16 of its total potential returns per unit of risk. Chevron is currently generating about -0.09 per unit of volatility. If you would invest  9,557  in Chevron on October 11, 2024 and sell it today you would lose (293.00) from holding Chevron or give up 3.07% of portfolio value over 90 days.

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

Zoom Video Communications  vs.  Chevron

Zoom Video Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoom Video sustained solid returns over the last few months and may actually be approaching a breakup point.

Chevron

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chevron may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zoom Video and Chevron

The main advantage of trading using opposite Zoom Video and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Chevron 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 Chevron will offset losses from the drop in Chevron's long position.

The idea behind Zoom Video Communications and Chevron 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.