Correlation Between Advanced Micro and Zoom Video

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

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

Diversification Opportunities for Advanced Micro and Zoom Video

0.54

Correlation Coefficient

Advanced Micro  Zoom Video

Very weak diversification

The 3 months correlation between Advanced and Zoom is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices 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 Advanced Micro 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 Advanced Micro Devices 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 Advanced Micro i.e., Advanced Micro and Zoom Video go up and down completely randomly.

Pair Corralation between Advanced Micro and Zoom Video

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the Zoom Video. In addition to that, Advanced Micro is 2.35 times more volatile than Zoom Video Communications. It trades about -0.24 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about -0.46 per unit of volatility. If you would invest  6,686  in Zoom Video Communications on January 20, 2024 and sell it today you would lose (692.00) from holding Zoom Video Communications or give up 10.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Advanced Micro Devices  vs.  Zoom Video Communications

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Advanced Micro is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Advanced Micro and Zoom Video

The main advantage of trading using opposite Advanced Micro and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro 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 Advanced Micro Devices 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.