Correlation Between Zoom Video and Snowflake

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

Diversification Opportunities for Zoom Video and Snowflake

0.15

Correlation Coefficient

Zoom Video  Snowflake

Average diversification

The 3 months correlation between Zoom and Snowflake is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake 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 Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Zoom Video i.e., Zoom Video and Snowflake go up and down completely randomly.

Pair Corralation between Zoom Video and Snowflake

Allowing for the 90-day total investment horizon Zoom Video Communications is expected to under-perform the Snowflake. But the stock apears to be less risky and, when comparing its historical volatility, Zoom Video Communications is 1.38 times less risky than Snowflake. The stock trades about -0.01 of its potential returns per unit of risk. The Snowflake is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,149  in Snowflake on February 9, 2024 and sell it today you would earn a total of  1,629  from holding Snowflake or generate 11.51% return on investment over 90 days.

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

Zoom Video Communications  vs.  Snowflake

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 recent stock price disarray, may contribute to short-term losses for the investors.

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 June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Zoom Video and Snowflake

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

The idea behind Zoom Video Communications and Snowflake 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.