Correlation Between Verizon Communications and Target Healthcare

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

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

Diversification Opportunities for Verizon Communications and Target Healthcare

0.24

Correlation Coefficient

Verizon Communications  Target Healthcare

Modest diversification

The 3 months correlation between Verizon and Target is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Target Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Healthcare REIT 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 Target Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Healthcare REIT has no effect on the direction of Verizon Communications i.e., Verizon Communications and Target Healthcare go up and down completely randomly.

Pair Corralation between Verizon Communications and Target Healthcare

Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the Target Healthcare. In addition to that, Verizon Communications is 1.14 times more volatile than Target Healthcare REIT. It trades about -0.06 of its total potential returns per unit of risk. Target Healthcare REIT is currently generating about -0.01 per unit of volatility. If you would invest  8,814  in Target Healthcare REIT on September 14, 2024 and sell it today you would lose (114.00) from holding Target Healthcare REIT or give up 1.29% 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.  Target Healthcare REIT

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

Target Healthcare REIT

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Target Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Target Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Verizon Communications and Target Healthcare

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

The idea behind Verizon Communications and Target Healthcare REIT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.