Correlation Between Zoom Video and CF Industries

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

Diversification Opportunities for Zoom Video and CF Industries

0.41

Correlation Coefficient

Zoom Video  CF Industries

Very weak diversification

The 3 months correlation between Zoom and CF Industries is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Zoom Video i.e., Zoom Video and CF Industries go up and down completely randomly.

Pair Corralation between Zoom Video and CF Industries

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 1.67 times more return on investment than CF Industries. However, Zoom Video is 1.67 times more volatile than CF Industries Holdings. It trades about 0.1 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.17 per unit of risk. If you would invest  8,120  in Zoom Video Communications on September 22, 2024 and sell it today you would earn a total of  440.00  from holding Zoom Video Communications or generate 5.42% return on investment over 90 days.

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

Zoom Video Communications  vs.  CF Industries Holdings

Zoom Video Communications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 13 (%) 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.

CF Industries Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zoom Video and CF Industries

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

The idea behind Zoom Video Communications and CF Industries Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.