Correlation Between Zoom Video and Globalfoundries

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

Diversification Opportunities for Zoom Video and Globalfoundries

0.75

Correlation Coefficient

Zoom Video  Globalfoundries

Poor diversification

The 3 months correlation between Zoom and Globalfoundries is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Zoom Video i.e., Zoom Video and Globalfoundries go up and down completely randomly.

Pair Corralation between Zoom Video and Globalfoundries

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 1.06 times more return on investment than Globalfoundries. However, Zoom Video is 1.06 times more volatile than Globalfoundries. It trades about 0.03 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.05 per unit of risk. If you would invest  8,311  in Zoom Video Communications on October 1, 2024 and sell it today you would earn a total of  71.00  from holding Zoom Video Communications or generate 0.85% return on investment over 90 days.

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

Zoom Video Communications  vs.  Globalfoundries

Zoom Video Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 12 (%) 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.

Globalfoundries

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and Globalfoundries

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

The idea behind Zoom Video Communications and Globalfoundries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.