Correlation Between Oi SA and Verizon Communications

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

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

Diversification Opportunities for Oi SA and Verizon Communications

-0.5

Correlation Coefficient

Oi SA  Verizon Communications

Very good diversification

The 3 months correlation between OIBR3 and Verizon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Oi SA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Oi SA 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 Oi SA 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 Oi SA i.e., Oi SA and Verizon Communications go up and down completely randomly.

Pair Corralation between Oi SA and Verizon Communications

Assuming the 90 days trading horizon Oi SA is expected to generate 73.09 times more return on investment than Verizon Communications. However, Oi SA is 73.09 times more volatile than Verizon Communications. It trades about 0.11 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.06 per unit of risk. If you would invest  1,700  in Oi SA on September 4, 2024 and sell it today you would lose (1,541) from holding Oi SA or give up 90.65% of portfolio value over 90 days.

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

Oi SA  vs.  Verizon Communications

Oi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Verizon Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Verizon Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oi SA and Verizon Communications

The main advantage of trading using opposite Oi SA and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oi SA 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 Oi SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.