Correlation Between Verizon Communications and Intuit

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

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

Diversification Opportunities for Verizon Communications and Intuit

-0.05

Correlation Coefficient

Verizon Communications  Intuit

Good diversification

The 3 months correlation between Verizon and Intuit is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Intuit Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuit 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 Intuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intuit Inc has no effect on the direction of Verizon Communications i.e., Verizon Communications and Intuit go up and down completely randomly.

Pair Corralation between Verizon Communications and Intuit

Assuming the 90 days horizon Verizon Communications is expected to under-perform the Intuit. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.03 times less risky than Intuit. The stock trades about -0.27 of its potential returns per unit of risk. The Intuit Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,304,870  in Intuit Inc on September 25, 2024 and sell it today you would lose (19,982) from holding Intuit Inc or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Verizon Communications  vs.  Intuit 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. In spite of fairly strong primary indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intuit Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intuit Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Intuit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and Intuit

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

The idea behind Verizon Communications and Intuit 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.