Correlation Between Global Opportunities and Verizon Communications

Can any of the company-specific risk be diversified away by investing in both Global Opportunities 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 Opportunities 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 Opportunities Trust and Verizon Communications, you can compare the effects of market volatilities on Global Opportunities 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 Opportunities with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Opportunities and Verizon Communications.

Diversification Opportunities for Global Opportunities and Verizon Communications

0.25

Correlation Coefficient

Global Opportunities  Verizon Communications

Modest diversification

The 3 months correlation between Global and Verizon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunities Trust and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Global Opportunities 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 Opportunities Trust 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 Opportunities i.e., Global Opportunities and Verizon Communications go up and down completely randomly.

Pair Corralation between Global Opportunities and Verizon Communications

Assuming the 90 days trading horizon Global Opportunities is expected to generate 17.94 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, Global Opportunities Trust is 2.41 times less risky than Verizon Communications. It trades about 0.04 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,995  in Verizon Communications on December 10, 2024 and sell it today you would earn a total of  580.00  from holding Verizon Communications or generate 14.52% return on investment over 90 days.

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

Global Opportunities Trust  vs.  Verizon Communications

Global Opportunities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Opportunities Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Global Opportunities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Verizon Communications

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Opportunities and Verizon Communications

The main advantage of trading using opposite Global Opportunities and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Opportunities 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 Opportunities Trust 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.