Correlation Between Zoom Video and Caledonia Mining

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

Diversification Opportunities for Zoom Video and Caledonia Mining

-0.61

Correlation Coefficient

Zoom Video  Caledonia Mining

Excellent diversification

The 3 months correlation between Zoom and Caledonia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Zoom Video i.e., Zoom Video and Caledonia Mining go up and down completely randomly.

Pair Corralation between Zoom Video and Caledonia Mining

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 0.87 times more return on investment than Caledonia Mining. However, Zoom Video Communications is 1.15 times less risky than Caledonia Mining. It trades about 0.19 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.07 per unit of risk. If you would invest  6,665  in Zoom Video Communications on September 12, 2024 and sell it today you would earn a total of  1,939  from holding Zoom Video Communications or generate 29.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Zoom Video Communications  vs.  Caledonia Mining

Zoom Video Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

Caledonia Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caledonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Zoom Video and Caledonia Mining

The main advantage of trading using opposite Zoom Video and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Caledonia Mining 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 Caledonia Mining will offset losses from the drop in Caledonia Mining's long position.

The idea behind Zoom Video Communications and Caledonia Mining 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.