Correlation Between Verizon Communications and Biogen

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

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

Diversification Opportunities for Verizon Communications and Biogen

-0.28

Correlation Coefficient

Verizon Communications  Biogen

Very good diversification

The 3 months correlation between Verizon and Biogen is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Verizon Communications i.e., Verizon Communications and Biogen go up and down completely randomly.

Pair Corralation between Verizon Communications and Biogen

Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.76 times more return on investment than Biogen. However, Verizon Communications is 1.32 times less risky than Biogen. It trades about -0.24 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.31 per unit of risk. If you would invest  4,076  in Verizon Communications on October 22, 2024 and sell it today you would lose (172.00) from holding Verizon Communications or give up 4.22% of portfolio value over 90 days.

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

Verizon Communications  vs.  Biogen Inc

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Verizon Communications and Biogen

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

The idea behind Verizon Communications and Biogen Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.