Correlation Between GameStop Corp and Zoom Video

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Can any of the company-specific risk be diversified away by investing in both GameStop Corp 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 GameStop Corp and Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GameStop Corp and Zoom Video Communications, you can compare the effects of market volatilities on GameStop Corp 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 GameStop Corp with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of GameStop Corp and Zoom Video.

Diversification Opportunities for GameStop Corp and Zoom Video

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between GameStop and Zoom is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp 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 GameStop Corp 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 GameStop Corp 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 GameStop Corp i.e., GameStop Corp and Zoom Video go up and down completely randomly.

Pair Corralation between GameStop Corp and Zoom Video

Considering the 90-day investment horizon GameStop Corp is expected to under-perform the Zoom Video. In addition to that, GameStop Corp is 3.19 times more volatile than Zoom Video Communications. It trades about -0.08 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about -0.16 per unit of volatility. If you would invest  6,962  in Zoom Video Communications on December 30, 2023 and sell it today you would lose (425.00) from holding Zoom Video Communications or give up 6.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

GameStop Corp  vs.  Zoom Video Communications

 Performance 
       Timeline  
GameStop Corp 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Zoom Video Communications 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.

GameStop Corp and Zoom Video Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GameStop Corp and Zoom Video

The main advantage of trading using opposite GameStop Corp and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GameStop Corp 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 GameStop Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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