Correlation Between IDT and Verizon Communications

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

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

Diversification Opportunities for IDT and Verizon Communications

-0.2

Correlation Coefficient

IDT  Verizon Communications

Good diversification

The 3 months correlation between IDT and Verizon is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding IDT Corp. and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and IDT 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 IDT Corporation 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 IDT i.e., IDT and Verizon Communications go up and down completely randomly.

Pair Corralation between IDT and Verizon Communications

Considering the 90-day investment horizon IDT Corporation is expected to under-perform the Verizon Communications. In addition to that, IDT is 1.59 times more volatile than Verizon Communications. It trades about -0.09 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  4,048  in Verizon Communications on October 9, 2024 and sell it today you would lose (87.00) from holding Verizon Communications or give up 2.15% of portfolio value over 90 days.

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

IDT Corp.  vs.  Verizon Communications

IDT Corporation

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, IDT 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

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 uncertain 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 IDT and Verizon Communications

The main advantage of trading using opposite IDT and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDT 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 IDT Corporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.