Correlation Between Zoom Video and Coffee Holding

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

Diversification Opportunities for Zoom Video and Coffee Holding

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Zoom and Coffee is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding 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 Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Zoom Video i.e., Zoom Video and Coffee Holding go up and down completely randomly.

Pair Corralation between Zoom Video and Coffee Holding

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 0.22 times more return on investment than Coffee Holding. However, Zoom Video Communications is 4.65 times less risky than Coffee Holding. It trades about -0.19 of its potential returns per unit of risk. Coffee Holding Co is currently generating about -0.2 per unit of risk. If you would invest  7,974  in Zoom Video Communications on October 14, 2024 and sell it today you would lose (273.00) from holding Zoom Video Communications or give up 3.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Zoom Video Communications  vs.  Coffee Holding Co

 Performance 
       Timeline  
Zoom Video Communications 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.
Coffee Holding 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Coffee Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Zoom Video and Coffee Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zoom Video and Coffee Holding

The main advantage of trading using opposite Zoom Video and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.
The idea behind Zoom Video Communications and Coffee Holding Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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