Correlation Between TC Energy and Verizon Communications

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

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

Diversification Opportunities for TC Energy and Verizon Communications

-0.46

Correlation Coefficient

TC Energy  Verizon Communications

Very good diversification

The 3 months correlation between TRP-PF and Verizon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy Corp and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and TC Energy 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 TC Energy Corp 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 TC Energy i.e., TC Energy and Verizon Communications go up and down completely randomly.

Pair Corralation between TC Energy and Verizon Communications

Assuming the 90 days trading horizon TC Energy is expected to generate 13.52 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, TC Energy Corp is 2.11 times less risky than Verizon Communications. It trades about 0.02 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,713  in Verizon Communications CDR on December 22, 2024 and sell it today you would earn a total of  187.00  from holding Verizon Communications CDR or generate 10.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

TC Energy Corp  vs.  Verizon Communications CDR

TC Energy Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TC Energy and Verizon Communications

The main advantage of trading using opposite TC Energy and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC Energy 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 TC Energy Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.