Correlation Between Zoom Video and NEXTDC

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

Diversification Opportunities for Zoom Video and NEXTDC

0.1

Correlation Coefficient

Zoom Video  NEXTDC

Average diversification

The 3 months correlation between Zoom and NEXTDC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD 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 NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of Zoom Video i.e., Zoom Video and NEXTDC go up and down completely randomly.

Pair Corralation between Zoom Video and NEXTDC

Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the NEXTDC. But the stock apears to be less risky and, when comparing its historical volatility, Zoom Video Communications is 2.19 times less risky than NEXTDC. The stock trades about -0.03 of its potential returns per unit of risk. The NEXTDC LTD is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  595.00  in NEXTDC LTD on April 24, 2025 and sell it today you would earn a total of  185.00  from holding NEXTDC LTD or generate 31.09% 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.  NEXTDC LTD

Zoom Video Communications

Risk-Adjusted Performance

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 comparatively stable basic indicators, Zoom Video is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NEXTDC LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXTDC LTD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NEXTDC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and NEXTDC

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

The idea behind Zoom Video Communications and NEXTDC LTD 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 Commodity Directory module to find actively traded commodities issued by global exchanges.