Correlation Between Verizon Communications and Global X

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

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

Diversification Opportunities for Verizon Communications and Global X

0.51

Correlation Coefficient

Verizon Communications  Global X

Very weak diversification

The 3 months correlation between Verizon and Global is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of Verizon Communications i.e., Verizon Communications and Global X go up and down completely randomly.

Pair Corralation between Verizon Communications and Global X

Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.63 times less return on investment than Global X. In addition to that, Verizon Communications is 1.16 times more volatile than Global X Funds. It trades about 0.05 of its total potential returns per unit of risk. Global X Funds is currently generating about 0.1 per unit of volatility. If you would invest  2,770  in Global X Funds on September 6, 2024 and sell it today you would earn a total of  2,385  from holding Global X Funds or generate 86.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Verizon Communications  vs.  Global X Funds

Verizon Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Funds

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Global X

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

The idea behind Verizon Communications and Global X Funds 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.