Correlation Between Zoom Video and Sprout Social
Can any of the company-specific risk be diversified away by investing in both Zoom Video and Sprout Social 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 Sprout Social 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 Sprout Social, you can compare the effects of market volatilities on Zoom Video and Sprout Social 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 Sprout Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Sprout Social.
Diversification Opportunities for Zoom Video and Sprout Social
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zoom and Sprout is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social 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 Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of Zoom Video i.e., Zoom Video and Sprout Social go up and down completely randomly.
Pair Corralation between Zoom Video and Sprout Social
Allowing for the 90-day total investment horizon Zoom Video is expected to generate 1.94 times less return on investment than Sprout Social. But when comparing it to its historical volatility, Zoom Video Communications is 1.45 times less risky than Sprout Social. It trades about 0.16 of its potential returns per unit of risk. Sprout Social is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,697 in Sprout Social on September 2, 2024 and sell it today you would earn a total of 505.00 from holding Sprout Social or generate 18.72% 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. Sprout Social
Performance |
| Timeline |
| Zoom Video Communications |
| Sprout Social |
Zoom Video and Sprout Social Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoom Video and Sprout Social
The main advantage of trading using opposite Zoom Video and Sprout Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Sprout Social 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 Sprout Social will offset losses from the drop in Sprout Social's long position.The idea behind Zoom Video Communications and Sprout Social 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.| Sprout Social vs. Progyny | Sprout Social vs. Endava | Sprout Social vs. Goosehead Insurance | Sprout Social vs. Sitime |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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