Correlation Between Zoom Video and WM Technology

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

Diversification Opportunities for Zoom Video and WM Technology

0.45

Correlation Coefficient

Zoom Video  WM Technology

Very weak diversification

The 3 months correlation between Zoom and MAPSW is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and WM Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WM Technology 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 WM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WM Technology has no effect on the direction of Zoom Video i.e., Zoom Video and WM Technology go up and down completely randomly.

Pair Corralation between Zoom Video and WM Technology

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 0.2 times more return on investment than WM Technology. However, Zoom Video Communications is 4.92 times less risky than WM Technology. It trades about 0.13 of its potential returns per unit of risk. WM Technology is currently generating about 0.02 per unit of risk. If you would invest  7,893  in Zoom Video Communications on September 19, 2024 and sell it today you would earn a total of  567.00  from holding Zoom Video Communications or generate 7.18% return on investment over 90 days.

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

Zoom Video Communications  vs.  WM Technology

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 abnormal primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.

WM Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, WM Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and WM Technology

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

The idea behind Zoom Video Communications and WM Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.