Correlation Between Advanced Info and Verizon Communications

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

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

Diversification Opportunities for Advanced Info and Verizon Communications

-0.08

Correlation Coefficient

Advanced Info  Verizon Communications

Good diversification

The 3 months correlation between Advanced and Verizon is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Advanced Info 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 Advanced Info Service are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Advanced Info i.e., Advanced Info and Verizon Communications go up and down completely randomly.

Pair Corralation between Advanced Info and Verizon Communications

Assuming the 90 days horizon Advanced Info is expected to generate 1.11 times less return on investment than Verizon Communications. In addition to that, Advanced Info is 4.35 times more volatile than Verizon Communications. It trades about 0.03 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.16 per unit of volatility. If you would invest  3,889  in Verizon Communications on December 29, 2024 and sell it today you would earn a total of  607.00  from holding Verizon Communications or generate 15.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Advanced Info Service  vs.  Verizon Communications

Advanced Info Service

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Advanced Info showed solid returns over the last few months and may actually be approaching a breakup point.

Verizon Communications

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Verizon Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Info and Verizon Communications

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

The idea behind Advanced Info Service and Verizon 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.