Correlation Between Snowflake and Zoom Video

Can any of the company-specific risk be diversified away by investing in both Snowflake and Zoom Video 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 Snowflake and Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Snowflake and Zoom Video Communications, you can compare the effects of market volatilities on Snowflake and Zoom Video 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 Snowflake with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Zoom Video.

Diversification Opportunities for Snowflake and Zoom Video

0.16

Correlation Coefficient

Snowflake  Zoom Video

Average diversification

The 3 months correlation between Snowflake and Zoom is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications and Snowflake 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 Snowflake are associated (or correlated) with Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of Snowflake i.e., Snowflake and Zoom Video go up and down completely randomly.

Pair Corralation between Snowflake and Zoom Video

Given the investment horizon of 90 days Snowflake is expected to generate 1.52 times more return on investment than Zoom Video. However, Snowflake is 1.52 times more volatile than Zoom Video Communications. It trades about 0.04 of its potential returns per unit of risk. Zoom Video Communications is currently generating about 0.0 per unit of risk. If you would invest  12,406  in Snowflake on January 31, 2024 and sell it today you would earn a total of  3,338  from holding Snowflake or generate 26.91% return on investment over 90 days.

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

Snowflake  vs.  Zoom Video Communications

Snowflake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snowflake has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 very healthy primary indicators, Zoom Video is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Snowflake and Zoom Video

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

The idea behind Snowflake and Zoom Video Communications 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.