Correlation Between Zoom Video and LENNAR

Can any of the company-specific risk be diversified away by investing in both Zoom Video and LENNAR 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 LENNAR 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 LENNAR P 525, you can compare the effects of market volatilities on Zoom Video and LENNAR 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 LENNAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and LENNAR.

Diversification Opportunities for Zoom Video and LENNAR

-0.51

Correlation Coefficient

Zoom Video  LENNAR

Excellent diversification

The 3 months correlation between Zoom and LENNAR is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and LENNAR P 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR P 525 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 LENNAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENNAR P 525 has no effect on the direction of Zoom Video i.e., Zoom Video and LENNAR go up and down completely randomly.

Pair Corralation between Zoom Video and LENNAR

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to under-perform the LENNAR. In addition to that, Zoom Video is 9.66 times more volatile than LENNAR P 525. It trades about -0.06 of its total potential returns per unit of risk. LENNAR P 525 is currently generating about -0.19 per unit of volatility. If you would invest  10,082  in LENNAR P 525 on September 25, 2024 and sell it today you would lose (92.00) from holding LENNAR P 525 or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Zoom Video Communications  vs.  LENNAR P 525

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 very fragile primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.

LENNAR P 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LENNAR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zoom Video and LENNAR

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

The idea behind Zoom Video Communications and LENNAR P 525 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.