Correlation Between Zoom Video and American Homes
Can any of the company-specific risk be diversified away by investing in both Zoom Video and American Homes 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 American Homes 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 American Homes 4, you can compare the effects of market volatilities on Zoom Video and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and American Homes.
Diversification Opportunities for Zoom Video and American Homes
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Zoom and American is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Zoom Video i.e., Zoom Video and American Homes go up and down completely randomly.
Pair Corralation between Zoom Video and American Homes
Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.58 times more return on investment than American Homes. However, Zoom Video is 1.58 times more volatile than American Homes 4. It trades about 0.03 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest 7,279 in Zoom Video Communications on September 3, 2024 and sell it today you would earn a total of 1,067 from holding Zoom Video Communications or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.92% |
| Values | Daily Returns |
Zoom Video Communications vs. American Homes 4
Performance |
| Timeline |
| Zoom Video Communications |
| American Homes 4 |
Zoom Video and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and American Homes
The main advantage of trading using opposite Zoom Video and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Zoom Video vs. Griffin Mining | Zoom Video vs. Sovereign Metals | Zoom Video vs. iShares Physical Silver | Zoom Video vs. AMG Advanced Metallurgical |
| American Homes vs. AfriTin Mining | American Homes vs. Caledonia Mining | American Homes vs. SilverCrest Metals | American Homes vs. CleanTech Lithium plc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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