Correlation Between Grab Holdings and Verizon Communications

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

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

Diversification Opportunities for Grab Holdings and Verizon Communications

-0.32

Correlation Coefficient

Grab Holdings  Verizon Communications

Very good diversification

The 3 months correlation between Grab and Verizon is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Grab Holdings and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Grab Holdings 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 Grab Holdings 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 Grab Holdings i.e., Grab Holdings and Verizon Communications go up and down completely randomly.

Pair Corralation between Grab Holdings and Verizon Communications

Given the investment horizon of 90 days Grab Holdings is expected to generate 1.83 times more return on investment than Verizon Communications. However, Grab Holdings is 1.83 times more volatile than Verizon Communications. It trades about 0.12 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.01 per unit of risk. If you would invest  351.00  in Grab Holdings on September 24, 2024 and sell it today you would earn a total of  139.00  from holding Grab Holdings or generate 39.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Grab Holdings  vs.  Verizon Communications

Grab Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grab Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Grab Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Grab Holdings and Verizon Communications

The main advantage of trading using opposite Grab Holdings and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grab Holdings 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 Grab Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.