Correlation Between Zoom Video and Covenant Logistics

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

Diversification Opportunities for Zoom Video and Covenant Logistics

0.89

Correlation Coefficient

Zoom Video  Covenant Logistics

Very poor diversification

The 3 months correlation between Zoom and Covenant is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics 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 Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of Zoom Video i.e., Zoom Video and Covenant Logistics go up and down completely randomly.

Pair Corralation between Zoom Video and Covenant Logistics

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.08 times more return on investment than Covenant Logistics. However, Zoom Video is 1.08 times more volatile than Covenant Logistics Group. It trades about 0.05 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about 0.05 per unit of risk. If you would invest  6,047  in Zoom Video Communications on September 30, 2024 and sell it today you would earn a total of  2,109  from holding Zoom Video Communications or generate 34.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Zoom Video Communications  vs.  Covenant Logistics Group

Zoom Video Communications

Risk-Adjusted Performance

15 of 100

Solid

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 uncertain basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and Covenant Logistics

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

The idea behind Zoom Video Communications and Covenant Logistics Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.