Correlation Between Zoom Video and Carvana

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

Diversification Opportunities for Zoom Video and Carvana

0.03

Correlation Coefficient

Zoom Video  Carvana

Significant diversification

The 3 months correlation between Zoom and Carvana is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of Zoom Video i.e., Zoom Video and Carvana go up and down completely randomly.

Pair Corralation between Zoom Video and Carvana

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to generate 0.45 times more return on investment than Carvana. However, Zoom Video Communications is 2.21 times less risky than Carvana. It trades about -0.26 of its potential returns per unit of risk. Carvana Co is currently generating about -0.22 per unit of risk. If you would invest  6,671  in Zoom Video Communications on January 25, 2024 and sell it today you would lose (506.00) from holding Zoom Video Communications or give up 7.59% of portfolio value over 90 days.

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

Zoom Video Communications  vs.  Carvana Co

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.

Carvana

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and Carvana

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

The idea behind Zoom Video Communications and Carvana Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.