Correlation Between NGEx Minerals and Verizon Communications

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

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

Diversification Opportunities for NGEx Minerals and Verizon Communications

-0.41

Correlation Coefficient

NGEx Minerals  Verizon Communications

Very good diversification

The 3 months correlation between NGEx and Verizon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NGEx Minerals and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and NGEx Minerals 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 NGEx Minerals 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 NGEx Minerals i.e., NGEx Minerals and Verizon Communications go up and down completely randomly.

Pair Corralation between NGEx Minerals and Verizon Communications

Assuming the 90 days trading horizon NGEx Minerals is expected to generate 2.26 times more return on investment than Verizon Communications. However, NGEx Minerals is 2.26 times more volatile than Verizon Communications CDR. It trades about 0.1 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about 0.01 per unit of risk. If you would invest  340.00  in NGEx Minerals on October 4, 2024 and sell it today you would earn a total of  1,001  from holding NGEx Minerals or generate 294.41% return on investment over 90 days.

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

NGEx Minerals  vs.  Verizon Communications CDR

NGEx Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, NGEx Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NGEx Minerals and Verizon Communications

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

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.