Correlation Between Zoom Video and Arrow Electronics

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

Diversification Opportunities for Zoom Video and Arrow Electronics

-0.83

Correlation Coefficient

Zoom Video  Arrow Electronics

Pay attention - limited upside

The 3 months correlation between Zoom and Arrow is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Zoom Video i.e., Zoom Video and Arrow Electronics go up and down completely randomly.

Pair Corralation between Zoom Video and Arrow Electronics

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 1.56 times more return on investment than Arrow Electronics. However, Zoom Video is 1.56 times more volatile than Arrow Electronics. It trades about 0.05 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.21 per unit of risk. If you would invest  8,269  in Zoom Video Communications on September 29, 2024 and sell it today you would earn a total of  113.00  from holding Zoom Video Communications or generate 1.37% return on investment over 90 days.

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

Zoom Video Communications  vs.  Arrow Electronics

Zoom Video Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Zoom Video and Arrow Electronics

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

The idea behind Zoom Video Communications and Arrow Electronics 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.