Correlation Between Zoom Video and Foremost Lithium

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

Diversification Opportunities for Zoom Video and Foremost Lithium

0.5

Correlation Coefficient

Zoom Video  Foremost Lithium

Very weak diversification

The 3 months correlation between Zoom and Foremost is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource 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 Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Zoom Video i.e., Zoom Video and Foremost Lithium go up and down completely randomly.

Pair Corralation between Zoom Video and Foremost Lithium

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to under-perform the Foremost Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Zoom Video Communications is 7.18 times less risky than Foremost Lithium. The stock trades about -0.09 of its potential returns per unit of risk. The Foremost Lithium Resource is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Foremost Lithium Resource on December 21, 2024 and sell it today you would lose (41.00) from holding Foremost Lithium Resource or give up 34.45% 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.  Foremost Lithium Resource

Zoom Video Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zoom Video Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Foremost Lithium Resource

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Foremost Lithium Resource are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Foremost Lithium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and Foremost Lithium

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

The idea behind Zoom Video Communications and Foremost Lithium Resource 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.