Correlation Between K1EL34 and Verizon Communications

Can any of the company-specific risk be diversified away by investing in both K1EL34 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 K1EL34 and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K1EL34 and Verizon Communications, you can compare the effects of market volatilities on K1EL34 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 K1EL34 with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of K1EL34 and Verizon Communications.

Diversification Opportunities for K1EL34 and Verizon Communications

0.5

Correlation Coefficient

K1EL34  Verizon Communications

Very weak diversification

The 3 months correlation between K1EL34 and Verizon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding K1EL34 and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and K1EL34 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 K1EL34 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 K1EL34 i.e., K1EL34 and Verizon Communications go up and down completely randomly.

Pair Corralation between K1EL34 and Verizon Communications

Assuming the 90 days trading horizon K1EL34 is expected to generate 1.33 times more return on investment than Verizon Communications. However, K1EL34 is 1.33 times more volatile than Verizon Communications. It trades about 0.18 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.05 per unit of risk. If you would invest  15,863  in K1EL34 on September 30, 2024 and sell it today you would earn a total of  9,127  from holding K1EL34 or generate 57.54% return on investment over 90 days.

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

K1EL34  vs.  Verizon Communications

K1EL34

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K1EL34 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, K1EL34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Verizon Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with K1EL34 and Verizon Communications

The main advantage of trading using opposite K1EL34 and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K1EL34 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 K1EL34 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 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.