Correlation Between Warner Music and Zoom Video

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

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

Diversification Opportunities for Warner Music and Zoom Video

-0.24

Correlation Coefficient

Warner Music  Zoom Video

Very good diversification

The 3 months correlation between Warner and Zoom is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group 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 Warner Music 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 Warner Music Group 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 Warner Music i.e., Warner Music and Zoom Video go up and down completely randomly.

Pair Corralation between Warner Music and Zoom Video

Assuming the 90 days trading horizon Warner Music Group is expected to under-perform the Zoom Video. In addition to that, Warner Music is 1.0 times more volatile than Zoom Video Communications. It trades about -0.19 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.05 per unit of volatility. If you would invest  1,728  in Zoom Video Communications on March 1, 2025 and sell it today you would earn a total of  100.00  from holding Zoom Video Communications or generate 5.79% return on investment over 90 days.

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

Warner Music Group  vs.  Zoom Video Communications

Warner Music Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Warner Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zoom Video Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoom Video may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Warner Music and Zoom Video

The main advantage of trading using opposite Warner Music and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music 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 Warner Music Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.