Correlation Between Zoom Video and PAX Global
Can any of the company-specific risk be diversified away by investing in both Zoom Video and PAX Global 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 PAX Global 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 PAX Global Technology, you can compare the effects of market volatilities on Zoom Video and PAX Global 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 PAX Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and PAX Global.
Diversification Opportunities for Zoom Video and PAX Global
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zoom and PAX is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and PAX Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Global Technology 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 PAX Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX Global Technology has no effect on the direction of Zoom Video i.e., Zoom Video and PAX Global go up and down completely randomly.
Pair Corralation between Zoom Video and PAX Global
Assuming the 90 days trading horizon Zoom Video is expected to generate 5.31 times less return on investment than PAX Global. But when comparing it to its historical volatility, Zoom Video Communications is 2.98 times less risky than PAX Global. It trades about 0.05 of its potential returns per unit of risk. PAX Global Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 20.00 in PAX Global Technology on September 12, 2024 and sell it today you would earn a total of 42.00 from holding PAX Global Technology or generate 210.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zoom Video Communications vs. PAX Global Technology
Performance |
| Timeline |
| Zoom Video Communications |
| PAX Global Technology |
Zoom Video and PAX Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and PAX Global
The main advantage of trading using opposite Zoom Video and PAX Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, PAX Global 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 PAX Global will offset losses from the drop in PAX Global's long position.The idea behind Zoom Video Communications and PAX Global Technology 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.| PAX Global vs. Zoom Video Communications | PAX Global vs. COSTCO WHOLESALE CDR | PAX Global vs. AEON STORES | PAX Global vs. INTERSHOP Communications Aktiengesellschaft |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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