Correlation Between Zoom Video and Imperial Brands
Can any of the company-specific risk be diversified away by investing in both Zoom Video and Imperial Brands 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 Imperial Brands 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 Imperial Brands PLC, you can compare the effects of market volatilities on Zoom Video and Imperial Brands 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 Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Imperial Brands.
Diversification Opportunities for Zoom Video and Imperial Brands
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Zoom and Imperial is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC 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 Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Zoom Video i.e., Zoom Video and Imperial Brands go up and down completely randomly.
Pair Corralation between Zoom Video and Imperial Brands
Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the Imperial Brands. In addition to that, Zoom Video is 1.88 times more volatile than Imperial Brands PLC. It trades about -0.3 of its total potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.12 per unit of volatility. If you would invest 259,300 in Imperial Brands PLC on October 12, 2024 and sell it today you would earn a total of 4,000 from holding Imperial Brands PLC or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zoom Video Communications vs. Imperial Brands PLC
Performance |
| Timeline |
| Zoom Video Communications |
| Imperial Brands PLC |
Zoom Video and Imperial Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and Imperial Brands
The main advantage of trading using opposite Zoom Video and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Imperial Brands 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 Imperial Brands will offset losses from the drop in Imperial Brands' long position.| Zoom Video vs. Grieg Seafood | Zoom Video vs. Universal Display Corp | Zoom Video vs. Ebro Foods | Zoom Video vs. Jacquet Metal Service |
| Imperial Brands vs. Zoom Video Communications | Imperial Brands vs. Scandinavian Tobacco Group | Imperial Brands vs. Gaztransport et Technigaz | Imperial Brands vs. Compal Electronics GDR |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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