Correlation Between Global X and Verizon Communications

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Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Funds and Verizon Communications, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Verizon Communications.

Diversification Opportunities for Global X and Verizon Communications

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Global and Verizon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Global X 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 Global X Funds 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 Global X i.e., Global X and Verizon Communications go up and down completely randomly.

Pair Corralation between Global X and Verizon Communications

Assuming the 90 days trading horizon Global X Funds is expected to generate 0.86 times more return on investment than Verizon Communications. However, Global X Funds is 1.16 times less risky than Verizon Communications. It trades about 0.28 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.11 per unit of risk. If you would invest  4,380  in Global X Funds on September 5, 2024 and sell it today you would earn a total of  775.00  from holding Global X Funds or generate 17.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Global X Funds  vs.  Verizon Communications

 Performance 
       Timeline  
Global X Funds 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.
Verizon Communications 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Verizon Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global X and Verizon Communications

The main advantage of trading using opposite Global X and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Funds 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.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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