Correlation Between Bank of America and Zoom Video
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Zoom Video Communications, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Zoom Video.
Diversification Opportunities for Bank of America and Zoom Video
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Zoom is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Bank of America 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 Verizon Communications 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 Bank of America i.e., Bank of America and Zoom Video go up and down completely randomly.
Pair Corralation between Bank of America and Zoom Video
Assuming the 90 days trading horizon Bank of America is expected to generate 5.93 times less return on investment than Zoom Video. But when comparing it to its historical volatility, Verizon Communications is 2.07 times less risky than Zoom Video. It trades about 0.03 of its potential returns per unit of risk. Zoom Video Communications is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,437 in Zoom Video Communications on November 6, 2024 and sell it today you would earn a total of 922.00 from holding Zoom Video Communications or generate 12.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Zoom Video Communications
Performance |
| Timeline |
| Verizon Communications |
| Zoom Video Communications |
Bank of America and Zoom Video Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Zoom Video
The main advantage of trading using opposite Bank of America and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. ON SEMICONDUCTOR | Bank of America vs. KENEDIX OFFICE INV | Bank of America vs. PLAYMATES TOYS | Bank of America vs. CENTURIA OFFICE REIT |
| Zoom Video vs. SIVERS SEMICONDUCTORS AB | Zoom Video vs. NorAm Drilling AS | Zoom Video vs. Volkswagen AG | Zoom Video vs. Darden Restaurants |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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