Correlation Between Lomiko Metals and Verizon Communications

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

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

Diversification Opportunities for Lomiko Metals and Verizon Communications

0.24

Correlation Coefficient

Lomiko Metals  Verizon Communications

Modest diversification

The 3 months correlation between Lomiko and Verizon is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lomiko Metals and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Lomiko Metals 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 Lomiko Metals 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 Lomiko Metals i.e., Lomiko Metals and Verizon Communications go up and down completely randomly.

Pair Corralation between Lomiko Metals and Verizon Communications

Assuming the 90 days horizon Lomiko Metals is expected to generate 3.62 times more return on investment than Verizon Communications. However, Lomiko Metals is 3.62 times more volatile than Verizon Communications CDR. It trades about 0.06 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about -0.21 per unit of risk. If you would invest  13.00  in Lomiko Metals on October 25, 2024 and sell it today you would earn a total of  1.00  from holding Lomiko Metals or generate 7.69% return on investment over 90 days.

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

Lomiko Metals  vs.  Verizon Communications CDR

Lomiko Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lomiko Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Verizon Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lomiko Metals and Verizon Communications

The main advantage of trading using opposite Lomiko Metals and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lomiko Metals 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 Lomiko Metals and Verizon Communications CDR 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.