Correlation Between Zoom Video and Occidental Petroleum

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

Diversification Opportunities for Zoom Video and Occidental Petroleum

0.12

Correlation Coefficient

Zoom Video  Occidental Petroleum

Average diversification

The 3 months correlation between Zoom and Occidental is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Zoom Video i.e., Zoom Video and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Zoom Video and Occidental Petroleum

Assuming the 90 days trading horizon Zoom Video Communications is expected to generate 1.38 times more return on investment than Occidental Petroleum. However, Zoom Video is 1.38 times more volatile than Occidental Petroleum. It trades about 0.21 of its potential returns per unit of risk. Occidental Petroleum is currently generating about 0.01 per unit of risk. If you would invest  1,520  in Zoom Video Communications on September 23, 2024 and sell it today you would earn a total of  556.00  from holding Zoom Video Communications or generate 36.58% return on investment over 90 days.

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

Zoom Video Communications  vs.  Occidental Petroleum

Zoom Video Communications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoom Video sustained solid returns over the last few months and may actually be approaching a breakup point.

Occidental Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Occidental Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Occidental Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zoom Video and Occidental Petroleum

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

The idea behind Zoom Video Communications and Occidental Petroleum 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.