Correlation Between Verizon Communications and Apartment Investment

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

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

Diversification Opportunities for Verizon Communications and Apartment Investment

0.17

Correlation Coefficient

Verizon Communications  Apartment Investment

Average diversification

The 3 months correlation between Verizon and Apartment is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and Verizon Communications 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 Verizon Communications are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of Verizon Communications i.e., Verizon Communications and Apartment Investment go up and down completely randomly.

Pair Corralation between Verizon Communications and Apartment Investment

Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.93 times more return on investment than Apartment Investment. However, Verizon Communications is 1.08 times less risky than Apartment Investment. It trades about 0.14 of its potential returns per unit of risk. Apartment Investment and is currently generating about 0.04 per unit of risk. If you would invest  3,859  in Verizon Communications on September 1, 2024 and sell it today you would earn a total of  560.00  from holding Verizon Communications or generate 14.51% return on investment over 90 days.

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

Verizon Communications  vs.  Apartment Investment and

Verizon Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 11 (%) 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.

Apartment Investment and

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Apartment Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and Apartment Investment

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

The idea behind Verizon Communications and Apartment Investment and 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.