Correlation Between Yellow Cake and Zoom Video

Can any of the company-specific risk be diversified away by investing in both Yellow Cake and Zoom Video 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 Yellow Cake and Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yellow Cake PLC and Zoom Video Communications, you can compare the effects of market volatilities on Yellow Cake and Zoom Video 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 Yellow Cake with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yellow Cake and Zoom Video.

Diversification Opportunities for Yellow Cake and Zoom Video

-0.38

Correlation Coefficient

Yellow Cake  Zoom Video

Very good diversification

The 3 months correlation between Yellow and Zoom is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Yellow Cake PLC and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications and Yellow Cake 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 Yellow Cake PLC are associated (or correlated) with Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of Yellow Cake i.e., Yellow Cake and Zoom Video go up and down completely randomly.

Pair Corralation between Yellow Cake and Zoom Video

Assuming the 90 days trading horizon Yellow Cake is expected to generate 9.45 times less return on investment than Zoom Video. But when comparing it to its historical volatility, Yellow Cake PLC is 1.12 times less risky than Zoom Video. It trades about 0.02 of its potential returns per unit of risk. Zoom Video Communications is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,827  in Zoom Video Communications on September 14, 2024 and sell it today you would earn a total of  1,850  from holding Zoom Video Communications or generate 27.1% return on investment over 90 days.

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

Yellow Cake PLC  vs.  Zoom Video Communications

Yellow Cake PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Cake PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Yellow Cake is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Zoom Video Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 14 (%) 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.

Pair Trading with Yellow Cake and Zoom Video

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

The idea behind Yellow Cake PLC and Zoom Video Communications 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.