Correlation Between Investment and Verizon Communications

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

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

Diversification Opportunities for Investment and Verizon Communications

0.51

Correlation Coefficient

Investment  Verizon Communications

Very weak diversification

The 3 months correlation between Investment and Verizon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Investment and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Investment 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 The Investment 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 Investment i.e., Investment and Verizon Communications go up and down completely randomly.

Pair Corralation between Investment and Verizon Communications

Assuming the 90 days trading horizon The Investment is expected to generate 0.66 times more return on investment than Verizon Communications. However, The Investment is 1.51 times less risky than Verizon Communications. It trades about 0.06 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.0 per unit of risk. If you would invest  28,500  in The Investment on October 22, 2024 and sell it today you would earn a total of  7,900  from holding The Investment or generate 27.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

The Investment  vs.  Verizon Communications

Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Investment and Verizon Communications

The main advantage of trading using opposite Investment and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment 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 The Investment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.