Correlation Between Zoom Video and Valens

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

Diversification Opportunities for Zoom Video and Valens

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Zoom and Valens is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Zoom Video i.e., Zoom Video and Valens go up and down completely randomly.

Pair Corralation between Zoom Video and Valens

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 0.6 times more return on investment than Valens. However, Zoom Video Communications is 1.67 times less risky than Valens. It trades about 0.04 of its potential returns per unit of risk. Valens is currently generating about 0.0 per unit of risk. If you would invest  6,902  in Zoom Video Communications on August 27, 2024 and sell it today you would earn a total of  1,686  from holding Zoom Video Communications or generate 24.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Zoom Video Communications  vs.  Valens

 Performance 
       Timeline  
Zoom Video Communications 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.
Valens 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Zoom Video and Valens Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zoom Video and Valens

The main advantage of trading using opposite Zoom Video and Valens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Valens 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 Valens will offset losses from the drop in Valens' long position.
The idea behind Zoom Video Communications and Valens 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.
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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