Correlation Between Zoom Video and 3M
Can any of the company-specific risk be diversified away by investing in both Zoom Video and 3M 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 3M 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 3M Company, you can compare the effects of market volatilities on Zoom Video and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and 3M.
Diversification Opportunities for Zoom Video and 3M
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zoom and 3M is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Zoom Video i.e., Zoom Video and 3M go up and down completely randomly.
Pair Corralation between Zoom Video and 3M
Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.89 times more return on investment than 3M. However, Zoom Video is 1.89 times more volatile than 3M Company. It trades about 0.23 of its potential returns per unit of risk. 3M Company is currently generating about 0.18 per unit of risk. If you would invest 1,750 in Zoom Video Communications on August 30, 2024 and sell it today you would earn a total of 258.00 from holding Zoom Video Communications or generate 14.74% 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. 3M Company
Performance |
| Timeline |
| Zoom Video Communications |
| 3M Company |
Zoom Video and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and 3M
The main advantage of trading using opposite Zoom Video and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| Zoom Video vs. Unity Software | Zoom Video vs. Take Two Interactive Software | Zoom Video vs. Monster Beverage | Zoom Video vs. Micron Technology |
| 3M vs. Charter Communications | 3M vs. Autohome | 3M vs. Metalurgica Gerdau SA | 3M vs. American Airlines Group |
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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