Correlation Between Zoom Video and ECGI Holdings

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Can any of the company-specific risk be diversified away by investing in both Zoom Video and ECGI Holdings 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 ECGI Holdings 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 ECGI Holdings, you can compare the effects of market volatilities on Zoom Video and ECGI Holdings 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 ECGI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and ECGI Holdings.

Diversification Opportunities for Zoom Video and ECGI Holdings

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Zoom and ECGI is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and ECGI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECGI Holdings 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 ECGI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECGI Holdings has no effect on the direction of Zoom Video i.e., Zoom Video and ECGI Holdings go up and down completely randomly.

Pair Corralation between Zoom Video and ECGI Holdings

Allowing for the 90-day total investment horizon Zoom Video is expected to generate 17.52 times less return on investment than ECGI Holdings. But when comparing it to its historical volatility, Zoom Video Communications is 10.83 times less risky than ECGI Holdings. It trades about 0.04 of its potential returns per unit of risk. ECGI Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.98  in ECGI Holdings on September 1, 2024 and sell it today you would lose (1.87) from holding ECGI Holdings or give up 94.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Zoom Video Communications  vs.  ECGI Holdings

 Performance 
       Timeline  
Zoom Video Communications 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.
ECGI Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ECGI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Zoom Video and ECGI Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zoom Video and ECGI Holdings

The main advantage of trading using opposite Zoom Video and ECGI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, ECGI Holdings 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 ECGI Holdings will offset losses from the drop in ECGI Holdings' long position.
The idea behind Zoom Video Communications and ECGI Holdings 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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