Correlation Between Hilton Worldwide and Verizon Communications

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

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

Diversification Opportunities for Hilton Worldwide and Verizon Communications

-0.19

Correlation Coefficient

Hilton Worldwide  Verizon Communications

Good diversification

The 3 months correlation between Hilton and Verizon is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Hilton Worldwide 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 Hilton Worldwide 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 Hilton Worldwide i.e., Hilton Worldwide and Verizon Communications go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Verizon Communications

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to under-perform the Verizon Communications. In addition to that, Hilton Worldwide is 1.04 times more volatile than Verizon Communications. It trades about -0.06 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.14 per unit of volatility. If you would invest  3,920  in Verizon Communications on December 27, 2024 and sell it today you would earn a total of  498.00  from holding Verizon Communications or generate 12.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hilton Worldwide Holdings  vs.  Verizon Communications

Hilton Worldwide Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Worldwide Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verizon Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Worldwide and Verizon Communications

The main advantage of trading using opposite Hilton Worldwide and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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 Hilton Worldwide 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.