Correlation Between Verizon Communications and Intermediate Capital

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

By analyzing existing cross correlation between Verizon Communications and Intermediate Capital Group, you can compare the effects of market volatilities on Verizon Communications and Intermediate Capital 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 Intermediate Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Intermediate Capital.

Diversification Opportunities for Verizon Communications and Intermediate Capital

0.23

Correlation Coefficient

Verizon Communications  Intermediate Capital

Modest diversification

The 3 months correlation between Verizon and Intermediate is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital 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 Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of Verizon Communications i.e., Verizon Communications and Intermediate Capital go up and down completely randomly.

Pair Corralation between Verizon Communications and Intermediate Capital

Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the Intermediate Capital. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.66 times less risky than Intermediate Capital. The stock trades about -0.44 of its potential returns per unit of risk. The Intermediate Capital Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  210,256  in Intermediate Capital Group on September 24, 2024 and sell it today you would lose (5,256) from holding Intermediate Capital Group or give up 2.5% of portfolio value over 90 days.

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

Verizon Communications  vs.  Intermediate Capital Group

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Intermediate Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Verizon Communications and Intermediate Capital

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

The idea behind Verizon Communications and Intermediate Capital Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.