Correlation Between Zoom Video and Cool

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

Diversification Opportunities for Zoom Video and Cool

-0.82

Correlation Coefficient

Zoom Video  Cool

Pay attention - limited upside

The 3 months correlation between Zoom and Cool is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company 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 Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Zoom Video i.e., Zoom Video and Cool go up and down completely randomly.

Pair Corralation between Zoom Video and Cool

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to under-perform the Cool. But the stock apears to be less risky and, when comparing its historical volatility, Zoom Video Communications is 1.31 times less risky than Cool. The stock trades about -0.1 of its potential returns per unit of risk. The Cool Company is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  779.00  in Cool Company on October 9, 2024 and sell it today you would earn a total of  43.00  from holding Cool Company or generate 5.52% return on investment over 90 days.

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

Zoom Video Communications  vs.  Cool Company

Zoom Video Communications

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 10 (%) 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.

Cool Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Zoom Video and Cool

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

The idea behind Zoom Video Communications and Cool Company 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.