Correlation Between Zoom Video and Danone SA
Can any of the company-specific risk be diversified away by investing in both Zoom Video and Danone SA 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 Danone SA 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 Danone SA, you can compare the effects of market volatilities on Zoom Video and Danone SA 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 Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Danone SA.
Diversification Opportunities for Zoom Video and Danone SA
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Zoom and Danone is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Zoom Video i.e., Zoom Video and Danone SA go up and down completely randomly.
Pair Corralation between Zoom Video and Danone SA
Allowing for the 90-day total investment horizon Zoom Video is expected to generate 1.64 times less return on investment than Danone SA. But when comparing it to its historical volatility, Zoom Video Communications is 1.0 times less risky than Danone SA. It trades about 0.03 of its potential returns per unit of risk. Danone SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,882 in Danone SA on August 27, 2024 and sell it today you would earn a total of 1,978 from holding Danone SA or generate 40.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.13% |
| Values | Daily Returns |
Zoom Video Communications vs. Danone SA
Performance |
| Timeline |
| Zoom Video Communications |
| Danone SA |
Zoom Video and Danone SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and Danone SA
The main advantage of trading using opposite Zoom Video and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Danone SA 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 Danone SA will offset losses from the drop in Danone SA's long position.The idea behind Zoom Video Communications and Danone SA 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.| Danone SA vs. Lifevantage | Danone SA vs. Simply Good Foods | Danone SA vs. Bellring Brands LLC | Danone SA vs. Seneca Foods Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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