Correlation Between Verizon Communications and Hospital Mater

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

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

Diversification Opportunities for Verizon Communications and Hospital Mater

-0.42

Correlation Coefficient

Verizon Communications  Hospital Mater

Very good diversification

The 3 months correlation between Verizon and Hospital is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Hospital Mater Dei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hospital Mater Dei 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 Hospital Mater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hospital Mater Dei has no effect on the direction of Verizon Communications i.e., Verizon Communications and Hospital Mater go up and down completely randomly.

Pair Corralation between Verizon Communications and Hospital Mater

Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.62 times more return on investment than Hospital Mater. However, Verizon Communications is 1.63 times less risky than Hospital Mater. It trades about 0.05 of its potential returns per unit of risk. Hospital Mater Dei is currently generating about -0.02 per unit of risk. If you would invest  3,060  in Verizon Communications on September 3, 2024 and sell it today you would earn a total of  1,359  from holding Verizon Communications or generate 44.41% return on investment over 90 days.

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

Verizon Communications  vs.  Hospital Mater Dei

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 uncertain basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hospital Mater Dei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hospital Mater Dei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Verizon Communications and Hospital Mater

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

The idea behind Verizon Communications and Hospital Mater Dei 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 Global Correlations module to find global opportunities by holding instruments from different markets.