Correlation Between VeriSign and Rockwell Automation

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

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

Diversification Opportunities for VeriSign and Rockwell Automation

0.3

Correlation Coefficient

VeriSign  Rockwell Automation

Weak diversification

The 3 months correlation between VeriSign and Rockwell is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation and VeriSign 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 VeriSign are associated (or correlated) with Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of VeriSign i.e., VeriSign and Rockwell Automation go up and down completely randomly.

Pair Corralation between VeriSign and Rockwell Automation

Given the investment horizon of 90 days VeriSign is expected to generate 0.73 times more return on investment than Rockwell Automation. However, VeriSign is 1.37 times less risky than Rockwell Automation. It trades about 0.08 of its potential returns per unit of risk. Rockwell Automation is currently generating about 0.04 per unit of risk. If you would invest  18,665  in VeriSign on October 26, 2024 and sell it today you would earn a total of  2,251  from holding VeriSign or generate 12.06% return on investment over 90 days.

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

VeriSign  vs.  Rockwell Automation

VeriSign

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 13 (%) 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.

Rockwell Automation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Rockwell Automation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VeriSign and Rockwell Automation

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

The idea behind VeriSign and Rockwell Automation 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.