Correlation Between Zoom Video and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Zoom Video and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Zoom Video and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and STMicroelectronics.
Diversification Opportunities for Zoom Video and STMicroelectronics
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Zoom and STMicroelectronics is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Zoom Video i.e., Zoom Video and STMicroelectronics go up and down completely randomly.
Pair Corralation between Zoom Video and STMicroelectronics
Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.32 times more return on investment than STMicroelectronics. However, Zoom Video is 1.32 times more volatile than STMicroelectronics NV. It trades about 0.16 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.04 per unit of risk. If you would invest 7,554 in Zoom Video Communications on September 2, 2024 and sell it today you would earn a total of 810.00 from holding Zoom Video Communications or generate 10.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zoom Video Communications vs. STMicroelectronics NV
Performance |
| Timeline |
| Zoom Video Communications |
| STMicroelectronics |
Zoom Video and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and STMicroelectronics
The main advantage of trading using opposite Zoom Video and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.The idea behind Zoom Video Communications and STMicroelectronics NV 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.| STMicroelectronics vs. Thyssenkrupp AG ON | STMicroelectronics vs. Cloudcoco Group PLC | STMicroelectronics vs. Trainline Plc | STMicroelectronics vs. Diversified Energy |
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.
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