Correlation Between British American and Zoom Video
Can any of the company-specific risk be diversified away by investing in both British American and Zoom Video 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 British American and Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Zoom Video Communications, you can compare the effects of market volatilities on British American and Zoom Video 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 British American with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Zoom Video.
Diversification Opportunities for British American and Zoom Video
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Zoom is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications and British American 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 British American Tobacco are associated (or correlated) with Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of British American i.e., British American and Zoom Video go up and down completely randomly.
Pair Corralation between British American and Zoom Video
Assuming the 90 days trading horizon British American Tobacco is expected to generate 2.66 times more return on investment than Zoom Video. However, British American is 2.66 times more volatile than Zoom Video Communications. It trades about -0.04 of its potential returns per unit of risk. Zoom Video Communications is currently generating about -0.53 per unit of risk. If you would invest 4,510 in British American Tobacco on October 25, 2024 and sell it today you would lose (169.00) from holding British American Tobacco or give up 3.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Zoom Video Communications
Performance |
| Timeline |
| British American Tobacco |
| Zoom Video Communications |
British American and Zoom Video Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Zoom Video
The main advantage of trading using opposite British American and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Zoom Video 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 Zoom Video will offset losses from the drop in Zoom Video's long position.| British American vs. Citizens Financial Group, | British American vs. MAHLE Metal Leve | British American vs. TAL Education Group | British American vs. Nordon Indstrias Metalrgicas |
| Zoom Video vs. Monster Beverage | Zoom Video vs. Clover Health Investments, | Zoom Video vs. Universal Health Services, | Zoom Video vs. Verizon 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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