Correlation Between Verizon Communications and Europa Metals

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Europa Metals 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 Verizon Communications and Europa Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Verizon Communications and Europa Metals

-0.88

Correlation Coefficient

Verizon Communications  Europa Metals

Pay attention - limited upside

The 3 months correlation between Verizon and Europa is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Verizon Communications 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 Verizon Communications are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Verizon Communications i.e., Verizon Communications and Europa Metals go up and down completely randomly.

Pair Corralation between Verizon Communications and Europa Metals

Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.33 times more return on investment than Europa Metals. However, Verizon Communications is 3.02 times less risky than Europa Metals. It trades about 0.11 of its potential returns per unit of risk. Europa Metals is currently generating about -0.09 per unit of risk. If you would invest  3,953  in Verizon Communications on December 29, 2024 and sell it today you would earn a total of  557.00  from holding Verizon Communications or generate 14.09% return on investment over 90 days.

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

Verizon Communications  vs.  Europa Metals

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Verizon Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Europa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Verizon Communications and Europa Metals

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

The idea behind Verizon Communications and Europa Metals 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.