Correlation Between Zoom Video and Northrop Grumman
Can any of the company-specific risk be diversified away by investing in both Zoom Video and Northrop Grumman 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 Northrop Grumman 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 Northrop Grumman, you can compare the effects of market volatilities on Zoom Video and Northrop Grumman 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 Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Northrop Grumman.
Diversification Opportunities for Zoom Video and Northrop Grumman
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Zoom and Northrop is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman 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 Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of Zoom Video i.e., Zoom Video and Northrop Grumman go up and down completely randomly.
Pair Corralation between Zoom Video and Northrop Grumman
Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.56 times more return on investment than Northrop Grumman. However, Zoom Video is 1.56 times more volatile than Northrop Grumman. It trades about 0.23 of its potential returns per unit of risk. Northrop Grumman is currently generating about -0.12 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 | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Zoom Video Communications vs. Northrop Grumman
Performance |
| Timeline |
| Zoom Video Communications |
| Northrop Grumman |
Zoom Video and Northrop Grumman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and Northrop Grumman
The main advantage of trading using opposite Zoom Video and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman'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 |
| Northrop Grumman vs. Spotify Technology SA | Northrop Grumman vs. CM Hospitalar SA | Northrop Grumman vs. Taiwan Semiconductor Manufacturing | Northrop Grumman vs. Take Two Interactive Software |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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