Correlation Between Zoom Video and Shopify

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

Diversification Opportunities for Zoom Video and Shopify

0.42

Correlation Coefficient

Zoom Video  Shopify

Very weak diversification

The 3 months correlation between Zoom and Shopify is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Zoom Video i.e., Zoom Video and Shopify go up and down completely randomly.

Pair Corralation between Zoom Video and Shopify

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 0.72 times more return on investment than Shopify. However, Zoom Video Communications is 1.38 times less risky than Shopify. It trades about -0.14 of its potential returns per unit of risk. Shopify is currently generating about -0.19 per unit of risk. If you would invest  6,473  in Zoom Video Communications on January 30, 2024 and sell it today you would lose (273.00) from holding Zoom Video Communications or give up 4.22% of portfolio value over 90 days.

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

Zoom Video Communications  vs.  Shopify

Zoom Video Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoom Video Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Shopify

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Zoom Video and Shopify

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

The idea behind Zoom Video Communications and Shopify 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.