Correlation Between FIEI3F and Verizon Communications

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Can any of the company-specific risk be diversified away by investing in both FIEI3F 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 FIEI3F and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIEI3F and Verizon Communications, you can compare the effects of market volatilities on FIEI3F 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 FIEI3F with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIEI3F and Verizon Communications.

Diversification Opportunities for FIEI3F and Verizon Communications

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between FIEI3F and Verizon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding FIEI3F and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and FIEI3F 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 FIEI3F 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 FIEI3F i.e., FIEI3F and Verizon Communications go up and down completely randomly.

Pair Corralation between FIEI3F and Verizon Communications

Assuming the 90 days trading horizon FIEI3F is expected to under-perform the Verizon Communications. In addition to that, FIEI3F is 2.88 times more volatile than Verizon Communications. It trades about -0.31 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.04 per unit of volatility. If you would invest  3,185  in Verizon Communications on October 10, 2024 and sell it today you would earn a total of  835.00  from holding Verizon Communications or generate 26.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy1.61%
ValuesDaily Returns

FIEI3F  vs.  Verizon Communications

 Performance 
       Timeline  
FIEI3F 

Risk-Adjusted Performance

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Over the last 90 days FIEI3F has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Verizon Communications 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

FIEI3F and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FIEI3F and Verizon Communications

The main advantage of trading using opposite FIEI3F and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIEI3F 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 FIEI3F 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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