Correlation Between Liberty Global and Verizon Communications

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

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

Diversification Opportunities for Liberty Global and Verizon Communications

0.16

Correlation Coefficient

Liberty Global  Verizon Communications

Average diversification

The 3 months correlation between Liberty and Verizon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Global PLC and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Liberty Global 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 Liberty Global PLC 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 Liberty Global i.e., Liberty Global and Verizon Communications go up and down completely randomly.

Pair Corralation between Liberty Global and Verizon Communications

Assuming the 90 days horizon Liberty Global PLC is expected to generate 1.38 times more return on investment than Verizon Communications. However, Liberty Global is 1.38 times more volatile than Verizon Communications. It trades about 0.01 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.02 per unit of risk. If you would invest  1,128  in Liberty Global PLC on October 24, 2024 and sell it today you would earn a total of  45.00  from holding Liberty Global PLC or generate 3.99% return on investment over 90 days.

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

Liberty Global PLC  vs.  Verizon Communications

Liberty Global PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Global PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty Global and Verizon Communications

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