Correlation Between Zoom Video and Costco Wholesale

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Can any of the company-specific risk be diversified away by investing in both Zoom Video and Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale, you can compare the effects of market volatilities on Zoom Video and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Costco Wholesale.

Diversification Opportunities for Zoom Video and Costco Wholesale

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Zoom and Costco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Zoom Video i.e., Zoom Video and Costco Wholesale go up and down completely randomly.

Pair Corralation between Zoom Video and Costco Wholesale

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.59 times more return on investment than Costco Wholesale. However, Zoom Video is 1.59 times more volatile than Costco Wholesale. It trades about 0.2 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.21 per unit of risk. If you would invest  1,493  in Zoom Video Communications on September 6, 2024 and sell it today you would earn a total of  529.00  from holding Zoom Video Communications or generate 35.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Zoom Video Communications  vs.  Costco Wholesale

 Performance 
       Timeline  
Zoom Video Communications 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
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. Despite somewhat weak basic indicators, Zoom Video sustained solid returns over the last few months and may actually be approaching a breakup point.
Costco Wholesale 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Costco Wholesale sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoom Video and Costco Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zoom Video and Costco Wholesale

The main advantage of trading using opposite Zoom Video and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.
The idea behind Zoom Video Communications and Costco Wholesale 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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