Correlation Between TARGET and VeriSign

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

By analyzing existing cross correlation between TARGET P 7 and VeriSign, you can compare the effects of market volatilities on TARGET and VeriSign 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 TARGET with a short position of VeriSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of TARGET and VeriSign.

Diversification Opportunities for TARGET and VeriSign

-0.77

Correlation Coefficient

TARGET  VeriSign

Pay attention - limited upside

The 3 months correlation between TARGET and VeriSign is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding TARGET P 7 and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign and TARGET 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 TARGET P 7 are associated (or correlated) with VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of TARGET i.e., TARGET and VeriSign go up and down completely randomly.

Pair Corralation between TARGET and VeriSign

Assuming the 90 days trading horizon TARGET P 7 is expected to generate 1.62 times more return on investment than VeriSign. However, TARGET is 1.62 times more volatile than VeriSign. It trades about 0.02 of its potential returns per unit of risk. VeriSign is currently generating about 0.0 per unit of risk. If you would invest  11,809  in TARGET P 7 on October 9, 2024 and sell it today you would earn a total of  535.00  from holding TARGET P 7 or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	38.51%
Values	Daily Returns

TARGET P 7  vs.  VeriSign

TARGET P 7

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, TARGET sustained solid returns over the last few months and may actually be approaching a breakup point.

VeriSign

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with TARGET and VeriSign

The main advantage of trading using opposite TARGET and VeriSign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TARGET position performs unexpectedly, VeriSign 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 VeriSign will offset losses from the drop in VeriSign's long position.

The idea behind TARGET P 7 and VeriSign 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 Stocks Directory module to find actively traded stocks across global markets.