Correlation Between Zoom Video and Addtech AB
Can any of the company-specific risk be diversified away by investing in both Zoom Video and Addtech AB 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 Addtech AB 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 Addtech AB, you can compare the effects of market volatilities on Zoom Video and Addtech AB 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 Addtech AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Addtech AB.
Diversification Opportunities for Zoom Video and Addtech AB
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Zoom and Addtech is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB 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 Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of Zoom Video i.e., Zoom Video and Addtech AB go up and down completely randomly.
Pair Corralation between Zoom Video and Addtech AB
Assuming the 90 days trading horizon Zoom Video is expected to generate 2.89 times less return on investment than Addtech AB. But when comparing it to its historical volatility, Zoom Video Communications is 1.16 times less risky than Addtech AB. It trades about 0.04 of its potential returns per unit of risk. Addtech AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,248 in Addtech AB on September 12, 2024 and sell it today you would earn a total of 1,410 from holding Addtech AB or generate 112.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zoom Video Communications vs. Addtech AB
Performance |
| Timeline |
| Zoom Video Communications |
| Addtech AB |
Zoom Video and Addtech AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and Addtech AB
The main advantage of trading using opposite Zoom Video and Addtech AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Addtech AB 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 Addtech AB will offset losses from the drop in Addtech AB's long position.The idea behind Zoom Video Communications and Addtech AB 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.| Addtech AB vs. Datadog | Addtech AB vs. TERADATA | Addtech AB vs. ITALIAN WINE BRANDS | Addtech AB vs. Zoom Video Communications |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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